Grifols board to meet as shares tank on Gotham City debt claims

(Sharecast News) - Shares in Grifols plunged by almost a third on Tuesday after Hedge fund Gotham City Research alleged the Spanish drug company's debt ratios were much higher than officially reported, wiping billions off its stock market value.

Gotham City said Grifols "manipulates" its reported debt and earnings before interest, taxes, depreciation and amortisation artificially, thereby reducing its leverage ratio through "deceptive and incorrect" treatment of financial statements through transactions with a company related to the founding Grifols family which controls the group.

The company was scheduled to hold a board meeting on Tuesday afternoon in response to the report.

"Grifols is aware of the recent false information and speculations published by Gotham City Research regarding the company's accounting and financial disclosure information," Grifols said in a filing to Spanish regulators.

"As a company committed to transparency, integrity, and ethical conduct, we categorically deny and reject any allegations of wrongful accounting or reporting practices of our consolidated financial statements."

The hedge fund said it believed Grifols' leverage ratio was close to 10 - 13 times earnings before interest, tax, depreciation and amortisation, rather than the six times officially reported by the company.

"Should our estimate of the Grifols' true leverage be correct, (it) will face notably higher financing costs. Consequently, we believe shares are uninvestable, likely zero," Gotham City said.

Reporting by Frank Prenesti for Sharecast.com