Gotham City Research, the firm that accused Grifols of manipulating its figures. Bearish fund led by Daniel Yu, an Asian American financier who sees himself as a vigilante: someone who goes where the regulator won’t go. That’s exactly what he advocated a decade ago when he exposed the lies of Gowex, the Spanish tech company that provides free Wi-Fi in cities and whose founder admitted to falsifying accounts. “Auditors, regulators and investment bankers rarely detect fraud. Bears detect it.” wrote Gotham, based in New York at the time.
As he did a few hours after Grifols’ report became known, Gowex began by denying the real issue: Gotham’s information was wrong and behind this was only the desire to get rich. Three days later, CNMV suspended the listing. For CEO Jenaro García, four more days were enough. Admit that the bassists were right and plead guilty in court. CNMV claims that it is currently “analyzing” the document together with Grifols.
Bear funds make their living by shorting stocks. They bet on companies whose valuations they believe are inflated, the exact opposite of a normal investor’s logic: Instead of thinking the stock will rise, they believe it will fall. So they borrow (‘lease’) the shares for a price (say 10 euros per share), sell them, They wait for the price to drop, say to 5 euros, buy it back and return it to the person they borrowed it from.
Inside price difference This is where they do business, so it’s in their best interest to publish a report assuring Grifols’ shares are worthless because the market will get scared and the stock will actually fall. Grifols opened with a 30% decrease on the stock market today.
even knowing Fame He said the bears (considered mostly speculators and opportunists) kept their operations secret to neither Yu nor the Gotham City Investigation. Moreover, they defend it. “Are we prejudiced bears? Certainly. Well, aren’t CEOs and investment bankers the same? Responding to Gowex’s accusations a decade ago, Gotham said: “The focus should be on who is right: the bassist or the bassist? The label.” A bassist is only as good as his analysis. “In fact, markets are unforgiving of bears who make mistakes and punish those who encourage deceptive practices.”
How does Gotham City Investigation work?
The report on Grifols is publicly available and consists of 65 pages. Gotham is a Catalan company, a pharmaceutical company focused on blood products. reduce the value of your debt and inflate your EBITDA (pre-tax profit). So according to Gotham’s analysis, its leverage will always be much higher than its KPMG-audited accounts say. The Grifols report is the eleventh report of the firm, which has been operating since 2013. Months of work go into each investigation.
They say nine months have passed with this. “We looked at Grifols last spring. On the one hand, it seemed like an undeniable story. On the other hand, despite acquisitions and increasing debt, its margin has been decreasing over the last eleven years. This reduction in margins does not appear to be occurring in the rest of the industry,” the document states. “Our research found that the market does not understand the companywhose job has changed in the last five years. Income from minority shares [sociedades controladas por la familia dueña de la empresa, pero sobre las que Grifols no posee ningún porcentaje] increased to almost 100 percent”.
Gotham, Grifols Includes results from companies that do not belong to it in its calculations —Haema and Biotest—but they have share buyback rights because they are owned by Scranton Enterprises, the investment vehicle of the Grifols owners. This could have inflated the results. At the same time, Gotham says: Grifols gave Scranton a $96 million loan that he had not accounted for. Where does the fund get this information? From Scranton accounts registered in the Netherlands.
At the time of the Gowex report, Gotham had two employees and had hired an analyst to contribute. This investigation, which lasted between six and nine months, found that the majority of Gowex’s declared income came from revenue. Companies that barely operate on behalf of individuals associated with Gowex. Subsequent investigation by the National Court revealed that one of the men in the front was the founder’s cleaning employee.
Gotham used publicly available sources (the company’s accounts, which are publicly accessible when listed on the Alternative Stock Market) and Advice from industry experts to support his accusations. Some of these are duly cited in the report. In addition, comparisons with other companies in the sector were included and the following conclusion was reached: Public Wi-Fi business wasn’t that booming As the Spanish tech company suggests. And, as he later explained, he spoke to company spokespeople without identifying himself as Gotham City Research.
In the case of Grifols, knowledge comes from its source. annual reports and reports of all relevant companies (mostly Scranton), in addition to valuations from analytical institutions and presentations to investors. But it’s not just that: for example, it uses press releases, information from the website, screenshots from Google Street View and employee reviews on Glassdoor, as well as statements from the company, to claim that one of its business dealings (with Immunotek) is suspicious. media. . Gotham uses every resource at its disposal to build a case and concludes: “Grifols’ shares are unstable and worth zero.”
Daniel Yu, like other bears, says he constantly evaluates possible companies to analyze them, and thanks to his good reputation, he usually get tips, Recommendations from people who invite you to research companies.
Gowex and other Gotham achievements
Gotham became famous with a report published in 2014. Quindell, British consultancy At the time it was listed on the alternative market of the London Stock Exchange. The index’s ‘pretty girl’ was targeting emerging companies such as Gowex. Gotham accused him of inflating his accounts, his only job “A golf course and a pub in Hampshire” He claimed that 80 percent of his income was questionable. Quindell crashed on the stock market and was investigated by the British Financial Conduct Authority. Two years later the company itself agreed: Accounts for previous years were restated and losses in the millions of dollars were recognized. has previously touted significant benefits. Auditor KPMG was fined 3.2 million lira.
This wasn’t Yu’s first report, but it was the first that sounded loud. Months later, he favored Gowex, whom he likened to a battered Pescanova. Yu prepared a second report, but Jenaro García had previously confessed. After the stock market crashed, Gowex declared bankruptcy. Garcia has been awaiting trial for ten years. Gowex is listed on the Alternative Shares Market (MAB) and was not the auditor big fourbut an independent who died before being tried. However, the Supreme Court recently ordered Ernst & Young to pay damages to four investors for lack of supervision.
Ernst&Young acted as a “registered advisor”, a private figure to MAB, and not an auditor. But the Supreme Court evaluated It is “rude” that Gotham, a New York firm, uncovered fraud and Ernst & Young failed to do so.
Source: Informacion
James Sean is a writer for “Social Bites”. He covers a wide range of topics, bringing the latest news and developments to his readers. With a keen sense of what’s important and a passion for writing, James delivers unique and insightful articles that keep his readers informed and engaged.