Gotham City Investigation revolves around a bearish fund that rose to prominence a decade ago after exposing a shortfall with Gowex. Today, that same fund directly targets the Ibex 35, challenging the Catalan pharmaceutical group Grifols and triggering widely watched moves across the Spanish stock market. The report issued by Gotham condemned the allegations of manipulation, yet the consequences were immediate: Grifols shares plunged, and investor confidence wavered as the market reeled from the disclosure surrounding the company’s results. The fallout contributed to a sharp decline in the Catalan group’s stock value and pressed the broader market into a state of heightened vigilance.
Gotham’s actions were driven by the findings in its report on Grifols. The fund openly signaled an intent to see the market fall, with the aim of profiting from the ensuing price moves. General Industrial Partners, a fund controlled by Gotham’s founders and Portsea Asset Management, notified the National Securities Market Commission about a downside position equal to 0.57% of Grifols’ capital. The strategy carried the potential for substantial gains, with the possibility of securing sizable profits if the position paid off. The fund disclosed that it had borrowed capital to support its leverage used in the operation.
What are bear funds and how do they work? In straightforward terms, a bear fund borrows money and sells the shares owned by other investors at the prevailing market price, planning to buy them back later at a lower price. The goal is to return the shares to their owners after a set period while pocketing the difference if the price declines. Profit grows as the stock market declines, and the more a stock’s value drops, the larger the potential payoff when the fund covers its short position.
The CNMV registry for Gotham and its partner Portsea shows that the 0.57% downside position tracked yesterday carried a price tag well above 34.5 million euros, based on Grifols’ Class A shares on the Ibex 35. When the continuous market’s preferred Class B shares are included, the value would rise to about 49.6 million euros. These figures illustrate the leverage involved and the magnitude of capital at risk in such strategies. The market’s reaction was swift: Grifols Class A shares slid more than 42% at the start of the trading session, while Class B shares extended losses beyond 35% as the day progressed.
The prospect of a significant drawdown in Grifols’ stock price created the potential for Gotham and its partner to reap substantial rewards. The theoretical profitability ranged from roughly 15 million to 21 million euros, depending on how capitalization was measured and which share type was counted. However, the exact mechanics of the drawdown transaction, including the precise prices at which shares were borrowed and later repurchased, remain unclear. This opacity makes it difficult to determine a definitive profitability figure for Gotham’s operation.
CNMV records also show that Ako Capital has positions in Grifols. In the latest disclosure, Ako Capital reported a reduction in its bearish exposure, moving from 0.55% to 0.41%. As part of its strategy, Ako had sold some Grifols shares in anticipation of further declines. The firm’s short interest had reached 1% in February of the previous year and has shown fluctuations since then, reflecting ongoing activity in the market as traders reassess Grifols’ outlook amid the controversy surrounding the company’s results and leverage.