Spain’s Grifols to sue short-seller over critical report, shares jump

By Joan Faus

BARCELONA (Reuters) -Spanish pharma company Grifols said on Wednesday it would launch legal action against Gotham City Research after the short-seller fund published a critical report that wiped $2.5 billion off the Barcelona-based firm’s market value on Tuesday.

After shedding 2% earlier on Wednesday, Grifols shares reversed to trade 7.4% higher in the early afternoon, after the firm said it would seek compensation in court for the financial and reputational damage to the company and its shareholders.

Board member Tomas Daga, who sits on Grifols’ audit committee and has advised it as a lawyer on several acquisitions, told Reuters the lawsuit would seek compensation at least equivalent to the share price loss.

Grifols did not say when or where it would file the lawsuit.

Its shares closed down 26% on Tuesday after slumping as much as 42% earlier in the day.

Daga added the company, which makes medicines with human blood plasma, would hold a conference call with investors on Thursday.

Grifols earlier said the Gotham City report was based on “false information” and denied all the allegations within it.

Gotham City questioned Grifols’ reported debt and earnings before interest, taxes, depreciation and amortisation (EBITDA), and leverage ratio of 6.7 times. It said the leverage ratio was close to 10 to 13 times EBITDA.

The yield on Grifols’ October 2028 bond, which pays a 3.875% coupon, was 0.42 percentage points lower on the day at 7.33% on the Marketaxess platform.

Gotham City also questioned the financial links between Grifols and Scranton Enterprises, an investment vehicle linked to the founding Grifols family.

Spain’s CNMV stock market supervisor said on Tuesday it aimed to clarify the situation, but that it made “no sense to question the integrity of Grifols’ audited accounts”.

In a note on Wednesday, Mirabaud Research analysts described Gotham City’s report as “partial”, but added it highlighted some accounting practices and ties with related parties that they said Grifols should abandon.

Short-sellers bet on share prices falls. General Industrial Partners, a joint venture between hedge funds Gotham City Research and Portsea Asset Management, said in a filing to CNMV that it had cut its short position in Grifols to 0.06% as of Tuesday from 0.57% previously.

($1 = 0.9133 euros)

(Reporting by Joan Faus, Inti Landauro and Danilo Masoni; Editing by Andrei Khalip and Mark Potter)