Grifols Short Attack More Normally A Slow-burn Credit Event

Grifols (GRF SM) is being targeted by short seller Gotham Research, equity indicated down over 30%, benchmark bond OAS blowing out (+440bp over last two sessions).

1. Gotham Research has form - it attacked SES Imagotag (SESL FP) in Jun-23, dropping the equity value by around 50% at one point, since when it's recovered half of that loss but still sits over 20% lower than pre-attack. Gotham was also instrumental in the Wirecard fraud discovery. The firm has a reputation in the market.
2. Gotham's claim is that Grifols understates debt and overstates control - Grifols has issued a denial already this morning and we take no view on the veracity of Gotham's claims.
3. In terms of credit read-through, Gotham also previously attacked AAC Technologies (2018 HK) in May-17, the equity now is still >75% lower than pre-attack (though did nearly double in 2H17!). However, the BBG 1yr default risk remained relatively low initially, then drifted higher only in the following year.