The evolution of profit lowers stock market bets against Grifols

BarcelonaGrifols' results evolution has served to reduce tension among investors, who have not been entirely calmed since the publication of the Gotham City Research report against the Catalan company in January 2024. The share price of the plasma derivatives giant remains far from the levels it held before the attack, but the good performance of its accounts has been enough to question some of the most critical theses regarding its value. Among them are those of some of the short sellers who had accumulated positions in the company's capital, and who have been reducing or withdrawing them in recent months.

It should be remembered that short sellers are investors who bet against a company's stock market performance and who profit if the share price falls. In mid-April, the pressure from these profiles reached its peak, mainly caused by the British hedge fund Kintbury Capital, which informed the National Securities Market Commission (CNMV) of a position exceeding 2.1% of the shareholding, the highest ever recorded for the Catalan company. Other profiles, such as Millennium International Management, increased their stake during the spring to 1% of the shares, according to the Spanish stock market regulator's records.

Since then, however, Kintbury has reduced its short-selling presence on several occasions. The last time was last Friday, when it lowered its position to below 1.8%. The rest of the short sellers have disappeared from the Commission's public register, which reports any short position above 0.5%.

The market interprets this withdrawal, which is not yet total, as a response to the company's results evolution. "The long-term investor has time on their side. The short term is against them, and maintaining short positions has a cost," warns Javier Cabrera, an analyst at XTB. In this regard, the series of quarterly accounts, "not brilliant, but positive," presented by the Catalan multinational, would have served to drive away some of the speculation.

"The main argument of short-sellers is usually that a company does not generate cash, does not improve its debt, and this puts downward pressure on the stock price," explains Cabrera. Looking at the results for the second quarter, Grifols significantly increased its free cash flow, to 91 million euros between January and June. This figure represents an increase of more than 103 million euros compared to the same period of the previous year, when a negative flow of more than 12 million was recorded.

This adds to a net profit of 227 million euros, a growth of over 28%. It also adds to the refinancing of the most urgent debt maturities, which has left the Catalan multinational with no financial obligations until the fourth quarter of 2028, according to the results presentation. "When a short-seller sees that the business is not as bad as they expected, they have to get out," concludes the expert.

"Hidden value" in the USA

Beyond the financial results, Grifols keeps in sight the possible IPO of its biopharmaceutical business in the US, the leading sword of the Catalan company's operation. According to the chairwoman of the board of directors, Anne-Catherine Berner, at the shareholders' meeting held in mid-June, the leap to the North American continuous market would serve to "allow its value to be recognized more clearly".

For Berner, the North American operation would have the effect of bringing to the surface a value that is not reflected in the company's stock. At that time, Grifols' shares were trading around 8.9 euros. This Friday, at the close of the session, they have fallen sharply, remaining around 9.8 euros.

In Cabrera's view, the North American operation, should it go ahead, "can generate a lot of value"; although the timing is not particularly favorable: "It is true that anything other than artificial intelligence takes a back seat, and with the major IPOs of Anthropic or OpenAI expected, there may be less demand for this type of stock". While awaiting the definitive move, the pharmaceutical company seems to have proven the less flattering investors somewhat right.