Grifols S.A. (GRFS) Admits Improper Accounting, Announces Restatements, Shares Decline Again – Hagens Berman

Hagens Berman urges investors in Grifols, S.A. American Depositary Shares (NASDAQ: GRFS) who suffered substantial losses to submit your losses now.

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Grifols S.A. (GRFS) Investigation:

On July 30, 2024, shares of embattled Spanish pharmaceutical and chemical manufacturer Grifols S.A. significantly declined during intraday trading after the company admitted to improper accounting related to its joint venture Biotek America LLC (“ITK JV”) and to its stake in Shanghai RAAS Blood Products Co. Limited (“SRAAS”).

This error led to three primary issues:

1. Overstated Reserves: The 2023 annual accounts included the assets and liabilities of the ITK JV incorrectly. This resulted in a €38 million negative adjustment to reserves, reflecting accumulated losses from 2021, 2022, and 2023.
2. Inflated Financial Performance: The first half of 2023 financial results were overstated. Correcting this error reduced net income by €14 million and EBITDA by €12 million.
3. Equity Writedown: Grifols incorrectly accounted for its stake in SRAAS as a non-controlling interest instead of using the equity method. As a result, the company took a whopping €457 million writedown on equity.

Grifols’ admissions are the latest development since activist short seller Gotham City Research first took aim at the company on Jan. 9, 2024, releasing a scathing report attacking the company’s accounting and corporate governance and saying that Grifols’ paltry cash generation has made its existing debt unsustainable.

Gotham published another report on Mar. 6, 2024, questioning Grifols’ “commitment to transparency, integrity, and ethical conduct.” This time, Gotham took issue with Grifols’ disclosure of a €319 million ($346.6 million) loan in its 2022 Annual Report. Grifols booked the loan under “other financial assets with other related parties,” however, Gotham claims it was lending activity between Grifols and Scranton Enterprises, the Grifols’ family entity, as part of a cash pooling financing arrangement. Gotham contended Grifols’ disclosure of the loan was “neither detailed, nor correctly identifies the nature of the transactions.”

Gotham is not the only investment firm to recently question the propriety of Grifols’ disclosures. On Mar. 5, 2024, Alantra Equities downgraded Grifols shares, reportedly saying it had “lost confidence” in the company. Alantra analyst Alvaro Lenze reportedly wrote that he was unable to make sense of the firm’s free cash flow guidance, adding that its explanations left him with “more questions than he had initially[,]” and cited a “lack of communication and transparency[.]”

Based on Grifols’ restatement and the investment firms’ allegations, prominent shareholder rights firm Hagens Berman has commenced an investigation into Grifols potential violation of the U.S. securities laws.

“We are investigating whether Grifols may have manipulated its debt and earnings through its treatment and disclosure of transactions with ITK JV and related entities,” said Reed Kathrein, the Hagens Berman partner leading the firm’s investigation.

If you invested in Grifols American Depositary Shares (GRFS) and have substantial losses, or have knowledge that may assist the firm’s investigation, submit your losses now »

If you’d like more information and answers to frequently asked questions about the Grifols investigation, read more »

Whistleblowers: Persons with non-public information regarding Grifols should consider their options to help in the investigation or take advantage of the SEC Whistleblower program. Under the new program, whistleblowers who provide original information may receive rewards totaling up to 30 percent of any successful recovery made by the SEC. For more information, call Reed Kathrein at 844-916-0895 or email GRFS@hbsslaw.com.

About Hagens Berman

Hagens Berman is a global plaintiffs’ rights complex litigation firm focusing on corporate accountability. The firm is home to a robust practice and represents investors as well as whistleblowers, workers, consumers and others in cases achieving real results for those harmed by corporate negligence and other wrongdoings. Hagens Berman’s team has secured more than $2.9 billion in this area of law. More about the firm and its successes can be found at hbsslaw.com. Follow the firm for updates and news at @ClassActionLaw.

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