Spanish court opens investigation into Gotham City's attack on Grifols
Adds details, comment from the court and context
MADRID, Nov 19 (Reuters) -An investigating magistrate at Spain's High Court has opened a probe into U.S.-based short seller Gotham City Research's actions that hammered the share price of Spanish pharmaceutical firm Grifols GRLS.MC in January.
The court said in a statement on Tuesday that Judge Jose Luis Calama had found enough evidence to merit an investigation into the possible violation of market and consumer protection laws via "dissemination of news or rumors ... that could contain totally or partly false" information.
The release of such information led to profits for some players, particularly Gotham, and losses for others, it added.
Grifols and Gotham did not immediately respond to requests for comment.
The violation of these laws can lead to prison terms of between six months and six years as well as fines worth triple the amount earned, the statement said.
The judge asked police to find the addresses of Daniel Yu, Gotham's founder, as well as of four of the fund's executives.
Calama asked Grifols if it wanted to be part of the investigation as an aggrieved party and requested that the company send a copy of the lawsuit it filed in New York against Gotham, Yu, and other executives in late January.
On Jan. 8, Gotham, which had previously shorted Grifols shares, released a report accusing the company of overstating earnings and understating debt. Grifols lost a third of its market value following the report.
Short selling involves borrowing shares to sell them, with the aim of buying them back at a lower price to make a profit.
The court said that as a result of the information release and its short selling, Gotham made a profit of 9.4 million euros ($9.9 million).
Grifols has repeatedly denied Gotham's allegations.
In September, Spain's stock market regulator CNMV sanctioned the fund for allegedly manipulating Grifols' share price, and the pharmaceutical company for defective financial reporting.
($1 = 0.9477 euros)
Reporting by Inti Landauro and Emma Pinedo. Editing by Andrei Khalip and Mark Potter
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