(Bloomberg) -- The US dropped its investigation into General Industrial Partners LLP, the parent company of Gotham City Research, which accused drug maker Grifols SA of deceptive accounting earlier this year.
The Securities and Exchange Commission “concluded the investigation” and does not “intend to recommend an enforcement action” against the hedge fund, according to a letter dated November 6 seen by Bloomberg.
The stock market regulator began its investigation in January after Gotham City Research published a report accusing Grifols of misleading reporting, including inflating profits by consolidating units it doesn’t own.
Grifols previously rejected the allegations, saying Gotham’s report contained “false information and speculations,” and has sued in New York. SEC spokesperson David Ausiello said in an email that the SEC does not comment on the existence or nonexistence of a possible investigation. Grifols couldn’t immediately comment.
After its own review, Spain’s markets regulator announced in September that it was opening disciplinary proceedings against GIP and Gotham for alleged market manipulation. The regulator also launched proceedings against Grifols for allegedly providing “inaccurate or untrue data” in its annual financial reports.
Following the CNMV’s investigation, Spain’s National Court announced the launch of a probe into Gotham and GIP for allegedly releasing “biased and deceptive” information, according to an emailed statement.
The court case was disclosed on the same day that Brookfield Asset Management, which had been looking to take the drug maker private, made an indicative offer valuing Grifols at €6.45 billion. A week later, the asset manager walked away from a potential deal, citing differences with the board around valuation.
Grifols’s shares fell sharply on the news of the deal collapse, as investors’ focus turn to the company’s debt and concerns resurface about cash generation and poor governance.
General Industrial Partners was launched in 2023 from the partnership between research firm Gotham City Research and hedge fund Portsea Asset Management. Gotham, which was founded by Daniel Yu in 2012, gained fame in Spain with its critical analysis of Let’s Gowex SA, a WiFi provider that had falsified its accounts.
--With assistance from Chris Dolmetsch and Nicola M. White.
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