Shares in the financial derivatives group regained investor confidence early yesterday after the publication of a scathing report by US bearish Gotham City Research Fund accusing it of “falsifying” its accounts and opened up as much as 7%. The impact was mitigated throughout the session and Grifols shares closed with a modest 0.25% advance driven by reconfirmation of the sale of its subsidiary in China. Late last Sunday night, Grifols clarified in a letter to the National Securities Market Commission (CNMV) that the Gotham City Research information would not affect the sale of its 20% stake in Shanghai Raas. “We continue to work on completing the transaction, as originally proposed,” Lexia Tan, vice president of Haier Group Corporation, said of the €1.6 billion deal, which will be completed in the first half of 2024.
The IBEX index began the week with a decline of 0.18%, reaching 10,076.9 points, after remaining at 10,100 points on Friday. In just four days, Grifols shares lost 38% of their value, or about 4.8 billion euros. The declines began last Tuesday, the date the fund's bearish report was published. Its titles fell by 25.9%, although they were down as much as 50%. It recovered some of its losses on Wednesday with a 12% rise, but on Thursday it was back down 16.2% after a conference call with investors to clear up doubts about Gotham City Research.
On the same day, it also coincided with a false reference to pharmaceuticals launched by Reuters in which it was stated that Santander was going to opt for a more radical reduction of the price target for Grifols by setting it at €9.90 per share, which is true. This was later denied by the bank and corrected by the agency.
The duet was underrated
Gotham criticized Grifols' sale of Scranton Enterprises, the founding family's investment vehicle, to two companies in 2018, BPC and Haema, and the calculation of profits from both the group and in Scranton. Meanwhile, the bearish fund believes the debt announced by the pharmaceutical company is understated by at least $920 million, mainly due to financial moves between the Catalan company and Scranton, which owns 8.4% of Grifols. The CNMV is investigating links between the two companies, and has asked the company to know the identity of the 22 investors in Scranton, three of whom belong to the founding family, Thomas Glanzmann, Chairman and CEO of Grifols, revealed during the meeting with investors.
In the conference call, Glanzman acknowledged there was room for improvement in management and communications, but criticized the published Gotham document. “Gotham merely sought capital gain and acted out of self-interest, using information to point to wrongdoing that was reviewed and approved by regulators and the auditor.”
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