Grifols files lawsuit against hedge fund for making 'false and misleading statements'

Spanish plasma medicines producer Grifols is clapping back at Gotham City Research, filing a lawsuit that accuses the New York hedge fund of “knowingly making false and misleading statements” about the company “to manipulate the value of Grifols’ stock for their own monetary gain.”

The complaint, filed in federal court in the Southern District of New York, comes in response to a report from Gotham on Jan. 9 which accused Grifols of wrongful accounting practices.

Gotham called Grifols shares “uninvestable,” and over the next several days the report triggered a drop in Grifols shares of more than 30% and a freefall of its market cap from $7.6 billion to $4.6 billion.

In reaction to the Gotham report, in a regulatory filing to Spain’s stock market watchdog CNMV, Grifols called it “false information” and “speculation.”

The accounting questions raised by Gotham surround Grifols’ 2018 acquisitions of Haema AG and Biotest though its subsidiary Scranton Enterprises. In essence, Gotham said Grifols has underreported its debt and overstated its profits.

Grifols' lawsuit seeks “redress for the financial and reputational damages” caused by the report. The company is seeking “injunctive and monetary relief” for damages that match or exceed its market cap drop.

In its filing, Grifols said that the defendants “amassed a large short position in Grifols, and then published and circulated a report with false statements about Grifols’ accounting, disclosures, financial condition and integrity.”

With short selling, a trader opens a short position by borrowing shares, usually from a broker-dealer, hoping to buy them back for a profit if the price declines.

In the lawsuit, Grifols called Gotham “predatory short sellers … who illicitly profit from their rigged short-and-distort schemes.”

In response to the Gotham report, analysts at ODDO BHF wrote that the "damage, regardless of its accuracy, will take some time to repair."