Gotham City Research says it focuses on companies with potential to fall 50-100%

The CEO of Gotham City Research, Daniel Yu, pointed out in an interview with 'El Economista' on Friday that the hedge fund focuses on companies that present "3 or 4 factors" that could make it fall between 50% and 100%.

Yu added that the group publishes their reports when it discovers that "there are facts that seem very worrying and of public interest."

Gotham City Research published a report questioning the finances of Catalan multinational Grifols earlier in January, which saw the share price of the pharmaceutical giant fall significantly. 

Yu claimed that Grifols did not explain "transactions between the different parties correctly."

The hedge fund still holds a "significant" short position on Grífols, meaning that they are essentially betting on the company failing.

Before publicly sharing the reports, Gotham City Research tracks the companies for between six and eight months.

Since the short seller published its report on January 9, the Catalan company's shares have fallen by around 40%, and now stands at around €8.40. 

Grifols have already announced they will take legal action against Gotham City Research for the "significant damage caused" to the Catalan company's finances and reputation. 

Credit rating agency keeps positive rating

Credit rating agency S&P has kept Grifols' rating at B+ despite Gotham City's allegations.

In a report published on Friday, S&P assures that the Catalan company has sufficient liquidity for the next twelve months and attributes this to the "global recovery" of the plasma market and Grifols' sale of 20% of Shanghai RAAS.

However, the document also warns that if new information is published, it could have a negative impact on the pharmaceutical giant.

"Further unfounded accusations from hedge funds could affect market sentiment in the short term and this could affect Grifols' position in the credit markets," S&P point out.

"This could translate into difficulties for Grifols to access the debt capital market, with possible impacts on its liquidity," it adds.

S&P expects the adjusted EBITDA margin to remain close to 22% in 2024, compared to 18% in 2023.