The group Pirelli ended up at the center of a financial and reputational case after the publication of a report by the bearish US fund Grizzly Research, which questioned the Italian tire manufacturer’s relations with Russia. The issue, which did not fail to have market effects, albeit temporary, brought the thorny issue of “short selling” used as a “weapon” against listed companies back to the fore.
Grizzly shoots zero on Pirelli
Grizzly said it was short Pirelli, arguing that its findings would indicate that “close relations with Russia” pose a threat to national security. The report claims to have identified a discrepancy in profits between those declared publicly by Pirelli and those that would have emerged from the financial statements filed in Russia.
In essence, Grizzly claims that the Russian documents suggest that 10% of Pirelli’s net profits come from operations in Russia, compared to a company communication according to which only 6% of revenues derive from Russia, the Middle East, Africa and India combined. The fund also said that a tire center located in occupied Ukrainian territory and listed on Pirelli’s website would serve the Russian military.
The industry context should be remembered: many large manufacturers, including Michelin, Continental, Goodyear and Bridgestone, were forced into major writedowns as they exited the Russian market after the full-scale invasion of Ukraine in 2022, while Pirelli at the time announced the suspension of further investments in the country.
Pirelli’s response and the threat of legal action
The company’s response was clear and immediate. In a note, Pirelli announced that what was reported by Grizzly Research “does not correspond to the truth”, reiterating that it does not produce tires for military purposes and specifying that this is a circumstance already known and communicated for some time to the competent Italian authorities. The group has also appointed the law firm Gatti Pavesi Bianchi Ludovici to act in all jurisdictions against those who spread this false information, to protect shareholders and the good name of the company.
Previous cases
Finally, a precedent should be noted that fits the story into a broader strategy of the Grizzly fund: last month the same short seller had made similar accusations of links with Russia against the German prosthesis company Ottobock. The outcome of the discussion, now destined to also move to the judicial field, will be decisive in rebuilding investor confidence in the Bicocca stock.
The reaction of the stock on the stock market
On the stock market front, the reaction this morning was dramatic, but short-lived. The stock was volatile, losing up to 13% before reducing its losses almost entirely and returning close to parity. At the opening, Pirelli shares lost around 5% to 5.62 euros in the wake of the short position declared by Grizzly Research. Subsequently, the stock canceled out the heavy initial loss by turning positive, up to 6.18 euros with an increase of 0.73%, compared to a low of the day set at 5.31 euros.
According to updated market data, Pirelli trades in the 6.05 euro area with a minimum of 5.31 and a maximum of 6.20: the breadth of the intraday excursion testifies to the strong nervousness of the operators and the intensity of the trading.
