Gotham City Research on Monday published a report charging that Sumitomo Pharmaceutical materially misrepresented elements of its fiscal 2025 financial results, identifying a potential discrepancy of up to 165 billion yen.
The short seller - which revealed it holds a short position in Sumitomo Pharma - contends that the company adjusted receivables in a way that served to enhance reported profits for both Sumitomo Pharmaceutical and its listed affiliate, Sumitomo Chemical Co., Ltd.
At the center of Gotham’s critique is a dividend declared by Sumitomo Pharma’s Swiss subsidiary, SMPS. Gotham noted that the company announced a 48 billion yen dividend from SMPS in March, an action that occurred only weeks before Sumitomo Pharma completed a 116.4 billion yen public offering in April.
However, Gotham said the notes accompanying Sumitomo Pharma’s parent-company fiscal 2025 financial statements reflect a 164 billion yen "distributions-in-kind" payment from SMPS rather than the 48 billion yen figure cited in the dividend announcement. The short seller flagged this mismatch as an up to 165 billion yen discrepancy.
Gotham additionally asserted that the 164 billion yen amount referenced in the notes does not appear on the company’s non-consolidated income statement, despite the notes characterizing the transaction as a non-operating event that took place within the FY2025 reporting period.
Based on these accounting inconsistencies, the short seller alleged that fiscal 2025 earnings for both Sumitomo Pharma and Sumitomo Chemical were bolstered by non-recurring items. Gotham said that excluding those items would result in a notable reduction in reported earnings.
In its report Gotham went further, labeling the equity of both companies as "uninvestable" and asserting that the shares face a 50% to 100% downside risk.
Market reaction in Tokyo reflected investor concern: shares of Sumitomo Pharma and Sumitomo Chemical fell roughly between 3.5% and 4% in trading, a steeper decline than the 0.6% fall in the Nikkei 225 index.
Sumitomo Pharma did not immediately reply to an emailed request for comment.
The allegations from Gotham focus specifically on the accounting disclosures and reported flows from the Swiss subsidiary, and the report’s conclusions follow from the differences it identifies between announced amounts and the entries in parent-company notes for FY2025.