The Grifols case, the devastating impact of the report by the British Gotham City firm that allegedly revealed the accounting makeover in the accounts of the Catalan family company, cannot be understood without two keywords: tunnel transactions. These two words in the Gotham report actually mean: Operations related to the sale of Grifols to Scranton, a holding company consisting of two companies nominally owned by the Grifols family: Biotest (also known as BPC Plasma) and Haema. According to the report, Grifols used this operation to close his books, increase his profits and reduce his debt, and therefore concluded that the value of his shares should be zero.
What is tunneling process
Gotham defines it this way: “The transfer of assets and profits outside companies for the benefit of those who control them”. In this case, it points out that the shareholders or management of the first company (in this case Grifols) are often the absolute owners of the second company (Scranton) and thus benefit from transactions they would otherwise take. “disaster.” It is worth remembering that although Grifols sold the Biotest and Haema companies to Scranton, it continued to consolidate both in its accounts, asserting that it had a purchase option.
How Grifols supposedly benefit
By combining Biotest and Haema, the supposed benefit of the operation to Grifols would be that it would be able to “reduce” its debt by “at least 920 million” while increasing its 2022 profits by 82 million. Taking both factors into account, Gotham concludes that Grifols’ leverage (debt) is not equal to 6 times Ebitda as the company claims, but is “closer to 10 or 13 times.” Hence his devastating impression of the Catalan company Ibex and his statement that the value of the shares should be zero. In fact, the market reacted and caused real distress in the stock market. Shares valued at over 14 euros before the report are now trading below 9. Approximately 4 billion euros of the company’s capital appears to be floating.
What is CNMV investigating?
At the outset of the case, the focus was on the fact that, as the Gotham report points out, the problem was that Grifols had consolidated Biotest and Haema into its accounts despite not having a direct presence in the capital. The company justified this accounting adjustment by explaining that both companies were part of Scranton, affiliated with Grifols, and also had a put option on them. However, the situation changed quickly when it became known The Securities Exchange Commission (CNMV), the market regulator, is focusing more on who is involved in Scranton It is greater than the accounting differences that may occur within the scope of consolidation. In fact, the CNMV sent Grifols a request giving him 10 days to provide information on individual Scranton shareholders and investors, including family members, former executives of the company and current executives.
What does the CNMV requirement mean?
Essentially, it implies that irregularities, if proven to exist, would not simply be due to accounting inconsistencies, but rather would be a situation that could lead to legal consequences of different assessments: There are those who do not ignore that they also pass through the criminal field, from sanctions to fines.. The key may be that one company (supposedly Grifols) used a holding company (supposedly Scranton) to manipulate the stock market.