(Bloomberg) -- Grifols SA shares fell the most ever on Thursday after management said the Spanish plasma maker may not generate cash this year, dealing a heavier blow to the stock than last month’s attack by a short seller.

The 35% drop was the biggest since Grifols listed in 2006 and followed comments by Chief Financial Officer Alfredo Arroyo on an afternoon call with investors to discuss fourth-quarter earnings, in which he said free cash flow this year could be zero.

Grifols had negative cash flow in both 2023 and 2022 and investors were expecting a strong improvement for this year. Banco Santander SA analyst Jaime Escribano was estimating between €300 million and €400 million, while Citigroup Inc’s Peter Verdult said that “what was not expected was commentary that 2024 FCF would be close to zero.”

When asked for a third time during the conference call about the forecast for “breakeven” cash flow, Arroyo said it was due to “accounting stuff.” 

The earnings come in the wake of a critical report on Jan. 9 by hedge fund Gotham City Research LLC, which sent the shares into a tailspin in early January. To assuage markets, Grifols earlier this month announced that it was hiring a new chief executive officer and improving corporate governance by removing members of the founding family from management.

In its report, Gotham said that Grifols’ average annual cash generation since 2014 meant its debt is unsustainable. 

Grifols has sued Gotham City in a New York court and denied any wrongdoing. Still, the accusations have placed the company’s accounting practices and governance in the spotlight — in particular, dealings with Scranton Enterprises BV, an investment firm controlled by former company executives that’s the firm’s second-largest shareholder.

Debt Options

Barcelona-based Grifols said it expects adjusted Ebitda of more than €1.8 billion for the full year and raised the leverage ratio target.

The firm also said it will address its 2025 maturities, totaling €1.8 billion, in the first half of this year, and will take into account both planned disposal proceeds and “various other options” including refinancing. 

On Thursday’s call Executive Chairman Thomas Glanzmann said that due diligence for Grifols sale of Shanghai RAAS, the Chinese firm in which it’s the largest holder, was completed “today” and reiterated that the deal is expected to close in the first half. The company also confirmed that the funds will be used to pay down debt.

Glanzmann also said that he has received reassurances from KPMG that a delay in auditing the earnings was down to an administrative matter. 

Gotham has claimed that Grifols and Scranton understated their respective debt-to-profit ratios, in part because they both consolidated profits from two companies owned by Scranton. Gotham also issued another report that challenged Grifols to clarify outflows of €321 million in its first-half 2023 earnings report and to explain who owns and controls Scranton.

--With assistance from Paul Jarvis and Macarena Muñoz.

(Updates with cash flow through sixth paragraph)

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