Spain's stock-market regulator, the CNMV, is investigating the allegations made by short-seller Gotham City Research against pharmaceutical company Grifols. Despite Grifols denying the allegations, its shares experienced a significant decline on Tuesday.

The CNMV confirmed that it is in contact with Grifols and will thoroughly examine Gotham City Research's claims. While the regulator cannot question audited company results, it cannot ignore such serious allegations either, according to CNMV President Rodrigo Buenaventura.

Despite the scrutiny, there are no plans to suspend Grifols's shares at this time. However, Gotham City Research raised concerns about Grifols's debt-to-earnings ratio, stating that it believes the company's shares are "uninvestable, and likely worthless."

Grifols responded by categorically rejecting these allegations of improper accounting and reporting practices. The company emphasized that all its financial records undergo annual audits and that it fully discloses all relevant information regarding significant transactions to ensure transparency and accuracy.

Gotham City Research also claimed to have uncovered undisclosed loans and suspect accounting practices related to Scranton Enterprises, a Grifols family entity. In response, Grifols clarified that these transactions and disclosures have been fully disclosed and audited since 2018, as required by the Spanish regulator.

Following these developments, Grifols shares plummeted by up to 40% before partially recovering. This decline marks the worst one-day percentage performance for the stock to date, according to FactSet data.

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