The National Securities Market Commission (CNMV) announced this Wednesday the opening of a sanction procedure against Grifols and against Gotham, the bearish company that published a devastating report on the Catalan pharmaceutical company at the beginning of the year. In the case of Grifols, the file was opened due to the possible commission of a “very serious” continuing infraction, the possible existence of “defects” in its accounts.
In the case of Gotham and a fund associated with this company, General Industrial Partners (GIP), the file was opened “for market manipulation on Grifols shares and non-compliance with the provisions of the Market Abuse Regulation concerning investment recommendations”.
In addition, the CNMV “has forwarded to the Public Prosecutor’s Office all information concerning the possible manipulative conduct of Gotham and GIP in the event of criminal proceedings for possible non-compliance with Article 284 of the Penal Code”, which penalizes the publication of false information to modify the price of a security. “In the event of the opening of criminal proceedings, the administrative sanction procedure would be suspended.”
The case filed against Gotham and GIP is based on a possible “very serious” violation, the aforementioned market manipulation, “through the concerted use of mechanisms or any other form of deception or artifice to affect the price of Grifols shares, according to the report published on January 9, 2024.”
In the case of Grifols, the pharmaceutical company may have committed another “very serious” violation, by providing the regulator with “regulated financial information containing inaccurate or misleading data or omitting relevant aspects” in the 2021, 2022 and 2023 accounts and in those of the first half of last year. A possible “serious” continuing violation is also being investigated, due to the inclusion in the management reports of that period of “false or misleading information regarding the method of calculating certain alternative performance measures (APM)”.
Following the CNMV’s announcement, Grifols indicated that “the sanction proposed to the company for the incidents indicated in said conclusions document does not amount to more than €1,000,000”. This sanction, it specifies, “will have no impact” on its accounts. And in the document notifying the sanction file “there are no new elements compared to those already reported and included in the CNMV conclusions document dated March 21, 2024”.
The organization also opened a case against Gotham for a possible minor violation, the objective presentation of investment recommendations and the effective communication of special interests or conflicts of interest in the investment recommendation on Grifols shares contained in its report.
The CNMV recalls that the report published by Gotham on January 9 warning of serious irregularities in Grifols’ accounts caused a stock market crash of 2.205 million dollars in the price of the pharmaceutical company, “reaching on the same day, before closing, losses of 3.814 million.” Previously, the company had placed short bets on the shares by borrowing shares.
Following the publication by Gotham of its report on Grifols, the CNMV opened an investigation and announced on March 21 that it had found “relevant deficiencies” in the company’s accounts.
Today, after completing the investigation into Gotham’s actions and “the analysis of the legality of Grifols’ information,” the stock market regulator “concluded that there are, on the one hand, well-founded indications of manipulation of information in Gotham and GIP’s operations by introducing into its report of January 9 several biased, false or misleading elements and, on the other hand, a failure to comply with the obligations relating to the objective presentation of investment recommendations.
And regarding Grifols, although it was agreed to open a sanction file, the CNMV reiterates in all the preliminary conclusions regarding its accounts and that they were transferred to the market on March 21: that there is no “evidence” that allows it to conclude that the company’s financial debt “does not correspond to reality” or that it has “poorly” consolidated the debt of its subsidiaries Haema and BPC, as Gotham claims.
The CNMV also concludes that “Grifols’ basic accounting figures were not incorrect”, except for the accounting treatment “of two specific operations” –Inmunotek and SRAAS–, which were explained and re-expressed separately by the company in the first half of 2024.
“With the exception of these two specific transactions, most of the anomalies in Grifols’ financial statements relate to incomplete explanations, lack of breakdown, inadequate calculation or presentation of APMs or failure to include transactions with related parties.”
However, “the deficiencies detected in Grifols’ regulated accounts, although complex to assess individually and separately, must be considered as a whole as significant. Although they did not identify significant anomalies in the regulated accounting figures, they made it difficult for investors in some years to adequately understand the financial position, results and cash flows of the issuer.
