Accused of accounting manipulation, the Spanish pharmaceutical giant Grifols counterattacks. The Catalan group announced this Wednesday, January 10, legal proceedings against the American activist fund Gotham City Research, which caused its fall on the Madrid Stock Exchange.
This Tuesday, the price of Grifols plummeted by 26%, resulting in a loss of market capitalization of nearly 2.2 billion euros. The legal offensive by the world leader in blood plasma-based drugs was, however, welcomed on the Madrid Stock Exchange, where Grifols shares had gained more than 12% this Wednesday at the end of the day.
This Wednesday, the Catalan group accused Gotham City Research, a specialist in short selling on the financial markets, of artificially lowering its stock, deliberately causing “great concern”, both among “shareholders” and “patients”. “.
A “misleading and incorrect” accounting choice
In its report, Gotham City Research notably accuses the pharmaceutical giant of consolidating the results of two companies, Haema and BPC Plasma, into its accounts, even though it has no longer had a stake in these entities since 2018 and their results have already been integrated. to those of its subsidiary Scranton Enterprises. These two companies “cannot report this income at the same time”.
He also accuses it of “artificially reducing” its debt, via “erroneous practices” and “omissions” in its accounting. For example, a $95 million loan to Scranton Enterprises in 2018 is not reported in Grifols’ documents and appears only in the accounts of its subsidiary.
This “misleading and incorrect” accounting choice inflates Grifols’ results and reduces its debt ratio, undoubtedly twice as high as that displayed, the report insists.
Financial transparency
These accusations were firmly refuted by the Spanish group, which assured that it had always demonstrated financial transparency. Grifols is subject to “robust” and “regular” controls by the audit firm KPG, which has never issued any “reservations”.
Speaking on Tuesday, during an economic meeting, the president of the Spanish stock market watchdog (CNMV), Rodrigo Buenaventura, called for caution, believing that “calling into question the entirety of the audited accounts of Grifols” had not “no sense”, even if the American fund’s accusations are “very serious”.
Gotham City Research, which invests by betting on the decline in the price of certain companies, has already taken on several large companies in recent years. His accusations could lead to bankruptcy filings. In 2014, the Spanish wifi provider Gowex went bankrupt a few months after a damning report on its accounts.