News
Eurofins shares sink after Muddy Waters discloses short position
Unlock Editor’s Digest for free
FT editor Roula Khalaf selects her favorite stories in this weekly newsletter.
Shares in French diagnostics and testing group Eurofins fell as much as 23% on Monday after hedge fund Muddy Waters revealed a bet against the company, claiming it was “optimized for malfeasance”.
The New York short-selling group warned in a report that Eurofins accounts “could contain material exaggerations of profits, cash balances and other asset values.”
Based in Luxembourg Eurofinslisted on the Paris stock exchange, it is a testing specialist that its president and largest shareholder, Gilles Martin, has built through hundreds of laboratory and business acquisitions since its creation in 1987.
The group’s shares closed down 16% on Monday, giving the company a market value of 8.8 billion euros.
Eurofins has become a major food, pharmaceutical and environmental testing conglomerate after expanding into medical diagnostics nine years ago. It completed 40 acquisitions for 158 million euros last year, after making 59 purchases the year before. Eurofins reported revenue of €6.5 billion and net profit of €308 million in 2023.
murky watersThe report alleged that it was a company “of strangeness and contradictions”, claiming that its accounting appeared prone to errors and that many of its internal financial reports appeared prone to manipulation.
Eurofins also began making smaller acquisitions that did not meet the disclosure threshold, according to the report. However, the New York hedge fund did not disclose evidence of irregularities.
For two decades after its initial public offering in 1997, Eurofins was one of the best-performing stocks in Europe. In recent years, the company has attracted attention from short sellers due to questions about its governance, accounting and structure.
In October 2019, London hedge fund Shadowfall published a report on the company titled “Too much money or too much fuss?!?” who criticized the group’s reports and predicted a liquidity crisis.
At the time, Eurofins said the report contained “inaccurate, incomplete, irrelevant or misleading statements” and subsequently raised €568 million from shareholders in 2020 as the pandemic boosted its medical testing arm.
Driven by Covid-19, Eurofins’ share price reached a September 2021 high of more than 125 euros per share.
Eurofins declined to comment on Monday, but on Tuesday it released a statement saying that “all allegations and insinuations contained [in the report are] are inaccurate, irrelevant, biased and/or misleading,” adding that Muddy Waters has never “directly engaged” with the company.
It added that it would provide more “detailed rebuttals and facts in due course”, stating that many complaints had been addressed following previous short-seller reports.
Additional reporting by Ian Johnston