Gotham City Research, the firm that accused Grifols of manipulating its figures, operates at the crossroads of short selling and investigative scrutiny. A bearish fund led by Daniel Yu, an Asian American financier who casts himself as a watchdog, has a history of exposing what it considers manipulation. A decade ago, Gotham challenged Gowex, the Spanish company that claimed to provide free city Wi‑Fi and whose founder admitted to falsifying accounts. Gotham described auditors, regulators, and investment bankers as rarely catching fraud, while bears would be the ones to uncover it.
When Grifols released its report, Gowex quickly rebutted Gotham’s claims, saying the information was inaccurate and motivated by profit motives. Within days, the CNMV suspended Gowex’s listing, and shortly afterward the firm’s CEO faced decisive consequences. CNMV indicated it was reviewing the document alongside Grifols. These episodes reflect the bear market strategy of betting against overvalued targets and the tense dance between short sellers and corporate disclosures.
Bear funds earn their living by shorting stocks. They view overvaluations as an opportunity to profit by borrowing shares, selling them at a high price, and buying them back later at a lower price to return the borrowed shares. This dynamic can motivate reports that push investors to reassess value and move prices downward. When Gotham released its Grifols report, Grifols’s shares opened with a notable decline, underscoring how market sentiment reacts to fresh analyses.
According to Gotham, some bears keep their research private to avoid tipping their hand to rivals and the companies they scrutinize. They defend their right to publish critical analyses, arguing that markets should punish mispricing and deceit. Critics, however, question whether such reports are driven by profit motives as much as by a desire to reveal truth. The debate centers on who is right: the analysts or the management teams they challenge, and how the label of credibility is earned by those who issue the reports. Markets, in this view, can be unforgiving toward bears who err and toward those who encourage questionable practices.
How does Gotham City Investigation work?
The Grifols report is publicly available and spans a substantial portion of pages. Gotham positions itself as a Catalan firm focused on analyzing the value and health of companies involved in the pharmaceutical space, particularly those with blood product operations. The firm argues that leverage is misrepresented in reported figures and that EBITDA may be inflated. Gotham explains that its conclusions hinge on deviations between reported figures and what its researchers believe is the true economic picture. The Grifols document marks the eleventh investigation the firm has conducted since its inception in 2013, with months of work invested in each case.
Gotham notes the nine months spent on Grifols, describing a story that appeared solid at first glance yet showed margins that trended downward over more than a decade. The firm asserts that the reduction in margins is not mirrored by peers in the sector and that ownership structures and minority income streams warrant closer scrutiny. It highlights changes in the company’s income composition, including significant increases in income attributed to minority-owned entities controlled by the owning family, which Gotham views as a potential red flag affecting the overall picture.
Gotham contends that Grifols’ calculations include results from entities not formally owned by Grifols themselves, such as Haema and Biotest, which hold buyback rights due to their connection to Scranton Enterprises, the investment vehicle of the Grifols owners. This, according to Gotham, could have inflated the reported numbers. The firm also claims a loan from Grifols to Scranton that reportedly went unaccounted for, based on Scranton accounts registered in the Netherlands.
At the Gowex episode, Gotham reportedly began with a small team, later bringing in an analyst to contribute. The investigation reportedly spanned several months and concluded that much of Gowex’s declared income came from revenue generated by entities connected to Gowex’s principals. A subsequent judicial inquiry revealed that a person at the front line of Gowex’s operations was actually a cleaning employee for the founder. Gotham says it used publicly available sources, including company accounts on markets, along with input from industry experts, to buttress its claims. It included sector comparisons and concluded that public Wi‑Fi ventures were not booming as marketed. The firm says it spoke with Gowex spokespeople without revealing its identity as Gotham City Research.
In the Grifols case, Gotham’s evidence reportedly comes from official annual reports, related entities such as Scranton, and valuations from analytical bodies and investor presentations. The report also drew on press releases, corporate websites, and publicly accessible materials, including screenshots and employee insights, to argue that a particular business relationship with Immunotek raised questions. Gotham asserts that Grifols’ shares were unstable and potentially overvalued based on its research and conclusions.
Daniel Yu, described by supporters as persistent, maintains that he continually evaluates potential targets and draws on a network of tips and recommendations that inform his research agenda.
Gowex and other Gotham achievements
Gotham rose to prominence with a 2014 report on Quindell, a British consultancy listed on the London Stock Exchange’s Alternative Market. The report centered on alleged earnings inflation and ascribed significant questionable income to the company’s leadership. Quindell later restated results and faced severe penalties from the British regulator. The investigation contributed to the firm’s wider reputation for exposing alleged mispricing in listed entities. Ernst & Young faced subsequent repercussions in connection with related inquiries.
This sequence was not York’s first salvo. Gotham later weighed in on Gowex, comparing it to a battered industry player and challenging the company’s stated profits. After Gowex disclosed issues and later bankruptcy, Jenaro García faced trial after a lengthy investigation. Gowex’s listing on the MAB was accompanied by questions about the role of the auditor structure. A later court ruling did touch on accountability for supervisory failures in some related cases, raising broader questions about the responsibility of major auditors in recognizing fraud signals early.
In the Gowex context, Ernst & Young acted as an advisor to the market rather than an auditor in that setting. The broader legal view has highlighted concerns about supervisory duties, prompting discussions about accountability and the role of independent research in safeguarding market integrity.