BarcelonaAfter two weeks of volatility that saw the company's value drop by 46%, Catalan multinational Grifols is working to restore market confidence and minimize the damage from the attack carried out by Gotham City Research last week. ARA has contacted experts to explore options available for Grífols to face the near future.
Stay the course
In the summer of 2021, Grifols already admitted that its debts were excessive and pledged to implement various measures to address them: not paying dividends, stopping buying other companies and gradually reducing debt with a company that never left to turn a profit, in addition to making occasional sales. “Shanghai RAAS has already been sold, and now we have to make sure they are not affected by the price,” explains Xavier Brun, Master’s Professor in Financial Markets at Barcelona School of Management (UPF). According to this expert, the key to Grifols' future lies in the solvency of 2025 (which it already faces specifically with the sale of the Chinese subsidiary) and 2027, for which it must start preparing.
Financial sources who requested anonymity indicate that the most obvious solution for Grifols to deal with its over-indebtedness situation involves selling another business unit: “It is the most organic option they have, which is a very complex sector with very few global players.” Additionally, they explained that Grifols had historically had two difficult motives to marry: too much growth — which led to the now questionable level of debt — and “the family’s will not to dilute its involvement.” This led to the complicated relationship between Scranton and Grifols. This desire not to lose a share of the share means that the sale has more numbers than the entry of another shareholder.
The need to deal with banking obligations forces Grifols to look for unusual ways to make money. The sector is convinced that the best that could happen to the Catalan company is the arrival of one White knight, also called companies or funds that enter into the capital of a company with needs. “It will be good for both parties, because whoever buys will do so at a 40% cheaper price and the company's stock may suddenly recover,” Brun points out. The problem again is the family's desire not to give up its position of control over the company: “If the share price falls, it hurts you, because every euro you raise weakens you much more than if the share were 20 euros.” However, the truth is that Grifols is now up for grabs: it has a stock market valuation of $5.1 billion, when it reached over $20.0 billion.
All the voices consulted confirm that they see it as inevitable that Grifols will address the problem Judgment Which Gotham condemned and which the markets always regretted. Aside from the presence of the family name in the company's management, in a fact that has been watered down, some of Scranton's shareholders are also directors of Grifols, and this has to change. I think it makes sense for this to end; They are companies linked together, prices are set and they depend on each other; “There may be a conflict of interest,” says one financial voice. “The situation has to change toward a better relationship between Scranton and the company and an end to some of the duplication of positions,” Brun adds. Luis Soldevilla, professor at EAE Business School and expert in digital reputation, joins the internal changes thesis. According to him, communication management could be improved because “we had to be quick, the market does not like uncertainty” and believes that Grifols was not very active when it came to combating Gotham's messaging.
Ups and downs are possible
What are the main risks facing Grifols? There is a diversity of opinions, but the main view, as the voices consulted indicate, concerns the inability to repay debts. So far, Grifols is on track to meet the 2025 deadline, and should focus on 2027. But a series of incidents could exacerbate the current context. One is the boom in class action lawsuits that already exist in the United States and are interpreted as shareholders being defrauded. Another, is that the Shanghai RAAS operation (confirmed by Haier this week) went to waste. In parallel with these scenarios, the decline in the share price also worries observers, because it may increase the guarantees demanded by banks (with Santander playing a prominent role) in the Catalan multinational company or in Scranton. Financial sources explained to ARA: “So far, every time they ask for more guarantees, Scranton responds, and other family figures come.”
Another scenario, which is highly unlikely, but can be considered from a theoretical point of view, is for the state to enter into the company's capital. Voices in the sector explain that this might make sense – “The country has entered Telefónica, while there are 50 Telefónica companies in the world, and Grifols is much more strategic, because there are only three in the world.” Of course, the Grifols family didn't seem likely to agree.
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