Investing.com - Grifols (BME:GRLS) continues to fall on the stock market on Wednesday after yesterday's blow from Gotham City Research's report on the pharmaceutical company, which suggests the existence of some manipulation in its accounts.
"The damage has already been done. Trust is a fundamental pillar in the investment world. And when it is lost, it creates a chain reaction among investors, as money quickly flees in search of security and stability, uncertainty and doubts are generated and investors withdraw capital to protect their interests, causing significant losses in the value of shares and companies, as we saw on Tuesday. In financial markets, confidence is both an asset and an indicator of a company's health", says Javier Molina, senior market analyst for eToro, where the expert analyses the situation of Grifols after the "devastating report" from Gotham City Research.
According to Molina, the report suggests the existence of some manipulation in its accounts by reporting that EBITDA should be 30% lower than declared, and that the company has a higher debt than presented. "The report was made public and shares on the stock market plummeted by more than 45% at the opening. According to this source, the company was artificially reducing its leverage to 6 times, when Gotham City estimates that it could be around 10-13 times (around 9 times according to market consensus). The full consolidation of BPC and Haema in the financial statements of Grifols and Scranton Enterprises (the company's vehicle) is questioned in the report as potentially misleading," it says.
"If true, Grifols would face higher financing costs and its shares could be considered uninvestable. In addition, the transparency of certain financial transactions and loans between Grifols and Scranton is questioned. The analysis raises doubts about the company's true financial status, suggesting a much more serious debt situation than reported," warns Molina.
"Despite the fact that, at the close of trading, losses were reduced to less than 25%, the damage has already been done. We will see how the company and the auditing firm defend themselves. A possible higher financial risk due to higher debt, the revision of the rating and the consequent increase in the cost of future financing, the legal issues that may arise, or doubts about the financial stability of the company are a priori key points that invite investors to remain on the sidelines," adds this analyst.
"Speculative positions, both up and down on the stock market, are healthy and necessary. There are entities that seek to exploit market inefficiencies and contribute, without going into the ethics of the business, to greater transparency in share prices. Another thing is that there has been misuse or malpractice with a perverse objective, which, in any case, will be checked soon," concludes Molina.
What do we do with the share?
According to the professional tool InvestingPro, as negative factors, Grifols operates with a significant debt burden and trades at a high multiple of earnings.
As aspects to watch, InvestingPro highlights that revenue growth has slowed recently.
Positive factors include strong profitability over the past three months.
Grifols does not pay dividends to shareholders.
The market value on Wednesday according to InvestingPro is 19.30 euros.
In a volatile environment, it is essential to have the best market information that can affect your portfolio. In this sense, the professional tool InvestingPro can help you.
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Translated from Spanish using DeepL.
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