SUPERNEWS

Equities

Short Seller Up 31.5% on Grifols, Amid Market Volatility

Hedge Fund Gains 31% on Grifols Short, Amidst Market Shifts and Rising Spinoff and 0DTE Trading Activity

By Alex P. Chase

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5/9, 10:39 EDT
General Electric Company
Grifols, S.A.
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Key Takeaway

  • General Industrial Partners gains 31.5% shorting Grifols, contrasting with losses by Elliott spinout Sparta Capital due to a bearish report.
  • Spinoff stocks, like GE Vernova, outperform the broader market by over 2%, with 19 more companies set for spinoffs this year.
  • Zero-day options trading reaches $862 billion in notional value, reflecting divided investor sentiment on its impact on market volatility.

Market Dynamics Shift

In a notable turn of events within the financial markets, General Industrial Partners (GIP), a London-based hedge fund, has capitalized on a short bet against Spanish company Grifols SA, leading to a significant 31.5% gain through April of this year. This outcome starkly contrasts with the experience of former Elliott Management trader Franck Tuil, whose bullish stance on the same stock resulted in losses for his hedge fund, Sparta Capital Management. GIP's success was particularly pronounced in January, with a 28% gain attributed to bearish positions following a critical report by its publishing arm, Gotham City Research LLC, which raised questions about Grifols' financial reporting. This scrutiny led to a 40% decline in Grifols' shares in 2023. In response, Grifols has taken legal action against the short seller, while also announcing expansions to its annual self-review to enhance corporate governance.

Spinoff Stocks Outperform

The market has also witnessed a surge in the performance of spinoff stocks, with GE Vernova, a product of General Electric's split, rallying more than 23% since its late March debut. This trend underscores the broader market's nearly 9% increase in 2024, despite a slight downturn in the second quarter. Morgan Stanley's analysis suggests that spinoffs typically outperform the broader market by more than 2% two years post-split, highlighting the strategic value of these corporate maneuvers. Notably, 19 more companies are scheduled to complete spinoffs this year, offering investors additional opportunities to engage with potentially undervalued entities.

Zero-Day Options Trading Grows

The trading landscape has been further complicated by the expansion of zero-day options (0DTE) trading, with the notional value of these contracts tied to the S&P 500 reaching approximately $862 billion in April. Despite the growth, investor sentiment remains divided, with concerns about the potential for market volatility and losses among retail investors. The Bloomberg Markets Live Pulse survey reveals a nearly even split among respondents regarding the future of 0DTE trading, indicating a cautious outlook on its impact on market dynamics.

Street Views

  • General Industrial Partners (Bearish on Grifols SA):

    "It made 28% in January alone from bearish wagers on the blood plasma company after its publishing arm Gotham City Research LLC questioned Grifols’ financial reporting in a report in early January. That sent the shares of the Barcelona-based firm tumbling 40% this year."