Episode #4

Hedging Alpha 🥷🏼

Story of the week:

Hedge fund Gotham City under investigation 🚨

Spain's High Court is investigating US-based hedge fund Gotham City for sharing misleading information about Spanish pharmaceutical firm Grifols. This led to a drop in Grifols' stock price, according to a report by AFP.

The probe is about a research note Gotham City released in January 2023. It accused Grifols of manipulating data to lower its debt ratio and financing costs. Grifols shares fell 25% after the report. The company has always denied the hedge fund's claims.

The court says Gotham City may have broken market and consumer protection laws by sharing "biased and misleading" information to get investors to sell Grifols shares. The fund made over €9.4m ($9.9m) by short-selling Grifols stock after publishing the report.

Gotham City has targeted several high-profile companies in recent years. Its tactics have contributed to corporate collapses. In 2014, Spanish Wi-Fi provider Gowex went bankrupt after Gotham City reported problems with its finances.

The court is investigating Gotham City after Grifols made major management changes. The company hired a new CEO and CFO earlier this year to rebuild investor confidence.

In July, the Grifols family and Canadian investment fund Brookfield began discussions to take the pharmaceutical firm private. On Tuesday, Brookfield proposed a €6.45 billion bid to acquire Grifols, offering €10.50 per A share. Grifols rejected the bid, saying it undervalued the company. The stock traded at €10.40, down 4.6%.

What else happened this week:

Hedge funds bet big on nuclear power amid AI-driven energy demand

US hedge funds ramp up Chinese ADR investments

Griffin open to selling minority Citadel stake

Deutsche Bank expects an 'extended' pause from Fed after a December rate cut

NY State Common Retirement Fund commits $4.6bn across PE, credit, secondaries and RE

Amazon deepens partnership with Anthropic, invests additional $4bn

Klarna scores deal with tech giant Lenovo

Markets

Most important figures of the week:

NVIDIA Earnings:

Nvidia has smashed Q3 expectations, reporting $35.1 billion in revenue and $0.81 EPS, driven by booming demand for AI chips. CEO Jensen Huang declared the "age of AI" is here, as the company forecasts $37.5 billion for Q4, slightly ahead of Wall Street predictions. Nvidia's Data Center revenue soared 112% YoY to $30.8 billion, while gaming revenue rose to $3.3 billion. Despite supply challenges for its next-gen Blackwell chips, Nvidia reassured investors about shipments starting this quarter. Shares have surged 192% YTD, but potential tariffs on Taiwan-made chips could impact costs and margins.

Unemployment Claims:

Jobless claims hit a seven-month low last week, with 213,000 filings, down from 219,000 the week prior and below expectations. While continuing claims rose to 1.9 million, their highest since 2021, the data suggests a steady labor market despite recent noise from strikes and severe weather. Economists describe the job market as "robust" with low layoffs, supported by better-than-expected recent data. The unemployment rate has dropped to 4.1%, easing concerns about a summer slowdown, though Fed officials remain cautious on rate cuts amid inflation worries. Markets now predict a 56% chance of a December rate cut.