But Don’t Seem To Be Discovering Anything Really New

Gotham City Research Make Over 20 Million After Sinking Grifols’ Share Price


Following the ac­cu­sa­tions made by Gotham City Research about alleged ac­coun­ting irre­gu­la­ri­ties at GRIFOLS (GRF), where on Monday it de­clared 0.5% of its ca­pital in short po­si­tions, the plasma de­ri­va­tives mul­ti­na­tional sent a new sta­te­ment to the CNMV (National Securities Market Commission) in which it de­nied the main ar­gu­ments of the bea­rish in­vest­ment firm. GRF stresses that all the in­for­ma­tion is con­tained in pu­blic do­cu­ments sub­mitted to the Spanish and US re­gu­la­tors and ac­cuses Gotham of ma­king a false ac­cu­sa­tion in order to make a pro­fit.

Gotham’s main accusation focuses on the fact that GRF consolidates in its balance sheet two companies (Haema and Biotest) that it sold in 2018 to Scranton Enterprises, a company controlled by members of the founding family and directors of the Catalan pharmaceutical company. In this regard, it points out that, if these companies were considered within the perimeter, GRF would have to book €900 million more leverage. In this sense, the company’s liabilities would be between 10 and 13 times EBITDA; between €8.9 billion and €9.7 billion.

In the Significant Event sent to the CNMV, GRF highlights that, following the sale to Scranton, it assumed the management of these assets and a plasma supply contract for a period of 30 years. In addition, this agreement included a call option in favour of GRF that can be exercised at any time. GRF assures that it can consolidate these assets in accordance with current regulations. The sale of the entities did not give rise to a loss of control, which is why the entities continue to be consolidated, being recorded as an equity transaction with no impact on the consolidated income statement, the pharmaceutical company indicates. In this regard, the multinational recalls that the accounting treatment was audited by KPMG and reported to the Spanish regulator, and was the subject of a request for information by the same, which was answered by the company on 14 January 2019.

Moreover, GRF points out that it is not involved in any way in the loan requested from a bank by Scranton to buy the two companies. However, it acknowledges that the financial institution which granted the loan made a loan from GRF to the vendor’s financing a condition of the loan. Despite the fact that Scranton had sufficient cash and did not need this loan, the financial institution thought it necessary to involve GRF in the transaction, the relevant fact indicates. The principal amount of the loan was $95 million. The interest rate is Euribor +2% with a maturity date of 28 December 2025 and the possibility of repayment at any time by the borrower.

On the other hand, Gotham City Research also reports that GRF continues to account for 100% of the business of Grifols Diagnostis Solutions after its partial sale to Shanghai Raas. The multinational indicates that it sold 45% of the economic rights and 40% of the voting rights. Considering the terms and conditions of the agreement, GRF concluded that with this transaction it maintains operational, political and economic control of GDS, which is why the entities continue to consolidate, said the Catalan pharmaceutical company. According to Bankinter analysts, “Gotham Research does not seem to be discovering anything really new because our own calculations already pointed to an adjusted Debt/EBITDA ratio of 9.0x”.

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