Grifols sees share price plummet after accusations of manipulating accounts

Catalan multinational Grifols has seen its stock market price plummet on Tuesday following a report that accuses the company of manipulating their accounts.

The company's price is down by around 30% since trading began on Tuesday morning, but it had dropped as low as 40% during the course of the morning, after it initially appeared on the index without a price.

The document, created by Gotham City Research fund, says that the company's shares are worth "zero."

A previous report from Gotham City Research brought down the company Gowex 10 years ago, and now says that Grifols "manipulates reported debt and EBITDA to artificially reduce its leverage."

The short seller's report argues that if the estimate of the real debt of Grifols is correct, "it will face significantly higher financing costs." The report believes that the company's debt should be between 10x and 13x, rather than the 6x that the company has posted. 

The fund group assures that the new CEO of Grifols, Thomas Glanzmann, does not represent a "change of management" in the company.

In addition, the report claims that Glanzmann was already on the board of directors "when the suspicious transactions described in the report happened."

According to Gotham, the Catalan firm uses other companies - GRF and Scranton, both linked to the Grífols family - to "manipulate" its debt.

The fund also indicates that the company loaned $95 million to Scranton in 2018, but this does not appear in the reports of the Catalan firm, and links it to a transaction of BPC and Haema.

At the same time, the report details that in Scranton's 2021 results it mentioned an increase in liabilities of $59 million corresponding to "Grifols advance payments," but this operation, according to Gotham, does not appear in the accounts of the company.

On Monday, Grifols closed on the markets at a price of €14.24, and with a stock market capitalization of €8.675 billion.

"False information and speculation"

Grifols defended its "transparency, integrity and ethical conduct" in a statement. 

The multinational hit back at what it termed "false information and speculation" about the company's financial health.

"We categorically deny and reject any accusation of accounting practices or erroneous information in our consolidated financial statements," the company makes clear.

Grifols also point out that it has "robust" internal controls and "regular and rigorous" audits. In addition, the company says that the transactions that Gotham mentions were "fully disclosed and audited."

The group recalls that as a listed company, it "fully reports and disseminates all relevant information relating to all its significant transactions with the highest level of integrity and transparency to reflect an accurate and fair view of the company's consolidated financial statements."

In this sense, Grifols also says their annual audits are carried out by "one of the four big firms" in the world, KPMG, and says they have always received favorable reports.

In a new statement published later in the day on Tuesday, Grifols said that "the only thing" that Gotham City Research intends with its report is "to lower the share price to make profits."

In a text sent to Spain's National Securities Market Commission (CNMV), Grifols says that the company "does not understand" the interpretation of the American fund because "each and every one" of the transactions in question from 2018 are recorded in the company's books and its public accounts presented to the Spanish regulator and the SEC of the United States.

"There is no new information that can be considered hidden," Grifols underlined. 

In turn, the president of the CNMV, Rodrigo Buenaventura, assured that the body will exercise its powers to "clarify the situation."

"It makes no sense to question the integrity of Grifols' audited accounts or to ignore the information published today," Buenaventura told the press in Madrid.

According to him, the commission has already contacted the company and will work in the coming days to get "additional information."

Regarding investors, he said that they are the CNMV's "number one" priority, but they are not protected by suspending the firm's listing.