Gotham City Research released a short report on Grifols SA GRFS, a Spanish pharmaceutical company, alleging that Grifols manipulated its accounts to lower its leverage artificially.
According to Gotham, this manipulation makes the company's shares not advisable for investment.
The accusation targets Grifols for allegedly manipulating debt and EBITDA figures, claiming the actual leverage could be significantly higher, possibly ranging between 10x-13x, in contrast to the reported 6x.
Gotham City said Grifols, which makes drugs with human plasma, "manipulates" its reported debt and earnings before interest, taxes, depreciation, and amortization (EBITDA) artificially, thus reducing its leverage ratio through "deceptive and incorrect" treatment of financial statements.
Grifols has "categorically" denied the allegations in a filing on Tuesday. Grifols said the Gotham City report was "false information" and "speculation" and insisted it has disclosed all information about all the transactions flagged by Gotham City "with the highest level of integrity and transparency."
Gotham City report says the stock market "appears to fundamentally misunderstand the company." It notes that non-controlling interests have grown from less than 0% to ~ 100% of Grifols' profits within five years, yet the Street models EBITDA and multiples on a 5-10-year basis.
Price Action: GRFS shares are down 38.50% at $6.85 during the premarket session on the last check Tuesday.
Image by Foto-Rabe from Pixabay
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