Grifols' shares plunge further on short-seller's new report

By Louis Goss

Grifols shares plunged by a further 14% on Wednesday following publication of another report from short seller Gotham City Research, raising additional questions about the Barcelona medicine maker's "transparency, integrity, and ethical conduct."

Grifols' share price previously fell more than 40% in January after the short-seller Gotham posted a report on January 9 claiming the Spanish blood-plasma products maker had manipulated its balance sheets to lower its debt to earnings ratios.

Now, shares in Grifol (ES:GRF) have plunged even further - falling 14% on Wednesday - after Gotham published another report seeking to counter the Spanish firm's attempt to refute the short-seller's original January 9 report.

The Madrid listed company previously responded to Gotham's claims in a statement published on January 9, in which Grifols said: "We categorically deny and reject any allegations of wrongful accounting or reporting practices."

In a post on January 26, Grifols also said it had filed a lawsuit against Gotham, its founder Daniel Yu, and others linked to the short seller, in seeking compensation for the "financial and reputational damages" caused by the short seller's report.

The Barcelona company later announced plans to shake-up its executive board on Febuary 5, in a move the Spanish firm said was aimed at separating management from ownership as part of a "long-planned" evolution strategy.

The management shakeup saw former Olympus Corporation CEO Nacho Abia replace Grifols' joint CEOs Victor Grifols Deu and Raimon Grifols, who are both members of the Grifols family which founded the drugmaker that bears their name in 1940.

In a report published on February 20, Gotham later hit back, stating Grifols had failed to properly respond to its allegations, as it put forward seven more detailed questions, and said the Spanish firm's executive shakeup indicates "that at least some of our concerns are valid."

Shares in Grifols then plunged by another 35% on February 28, after the 84-year-old company which produces a range of medical products posted underwhelming results for the full-year 2023, in the company's sharpest share drop ever.

Gotham's most recent report published on March 6 alleges Grifols "selectively disclosed new information" to analysts, but not to the wider public, about its balance sheets in seeking to refute the short-seller's allegations.

The short-seller said Grifols' decision to give this information to select analysts, without disclosing it to the wider public, raises questions about the company's transparency and Gotham also said the new information failed to properly refute its allegations.

Gotham's report also said Grifols' management shakeup signals the Spanish company agrees with its concerns about possible conflicts-of-interest involving members of the founding family and the wider company.

"It is unclear to us whether these recent corporate governance changes are bona fide attempts to clean house or if they are a ruse to give the appearance of reform. Only time will tell; what is clear for now, in our opinion, is that Grifols may disparage us with their words, but in action, they appear to agree with us," Gotham's report says.

Gotham City Research first gained prominence for shorting London listed insurance claims processing company Quindell Group, after publishing a 74-page report that raised questions about its business, including its investments in a golf club.

Quindell later successfully sued Gotham for libel in Britain's High Court, after billions were knocked of its share price.

-Louis Goss

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03-06-24 0630ET

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