Grifols SA, the Spanish blood-plasma company, is on track for its most significant weekly drop ever as shares continue to slide, down nearly 40% since the release of a critical report by short seller Gotham City Research LLC earlier this week. The report raised concerns about Grifols’s accounting and corporate governance, specifically questioning financial statements that included earnings from BPC Plasma and Haema.
Shares of the Barcelona-based company plunged 12% on Friday, reaching €8.72 at 11:22 a.m. This drop, coupled with previous declines, resulted in a total market value reduction of €3.3 billion ($3.6 billion). Grifols management’s efforts to reassure investors through regulatory filings and a call with CEO Thomas Glanzmann failed to stabilize the stock, with a 16% slump observed on Thursday alone.
Gotham City’s report alleged that Grifols included earnings from BPC Plasma and Haema, companies owned by Scranton Enterprises NV, an investment vehicle linked to some members of the Grifols founding family and former executives. Despite regulatory filings countering these allegations, the market’s reaction has been severe, leading to the company’s largest weekly drop in its 18 years on the stock market.
During the call, Glanzmann accused Gotham City of distorting financial information for self-interest and financial gain. The board announced its intention to take legal action against the short seller. Although the Spanish securities regulator CNMV requested additional information in response to the report, investor concerns persist.
Analysts have pointed out that Grifols fell short in addressing investor concerns during the call. JB Capital analyst Joaquin Garcia-Quiros suggested that providing more information on the Scranton balance sheet situation and reassurance that such third-party transactions would not recur could have alleviated concerns.
Investors are closely monitoring Grifols’s substantial debt, amounting to €9.5 billion as of September, with nearly €2 billion maturing in 2025. Despite the negative market sentiment, analysts are largely supporting the company, with 19 buy recommendations, five holds, and one sell, according to Bloomberg data.
Banco Santander SA views the recent slide in Grifols stock as a buying opportunity. The company’s announcement of an agreement to sell an investment, crucial for reducing indebtedness, did not contain penalties for withdrawal by either party. Analyst Jaime Escribano noted that the process to sell the majority of Grifols’s stake in Shanghai RAAS Blood Products Co. to Haier Group for around $1.8 billion remains on track.
