Allegations by Gotham City Research
Gotham City Research released a report on 4 August 2026 accusing Japan‑based Sumitomo Pharmaceutical (ticker TYO:4506) of misstating its fiscal 2025 financial statements by as much as ¥165 billion (approximately $1.05 billion). The short‑seller claims the company manipulated receivables to inflate earnings for both Sumitomo Pharma and its parent, Sumitomo Chemical Co., Ltd (ticker TYO:4005).
Dividend Discrepancy Details
According to the report, Sumitomo Pharma announced a ¥48 billion dividend from its Swiss subsidiary, SMPS, in March 2026, shortly before a ¥116.4 billion public offering in April 2026. Gotham points out that the notes to the parent‑company’s FY2025 financial statements instead disclose a ¥164 billion “distributions‑in‑kind” payment from SMPS, a figure that does not appear on the non‑consolidated income statement despite being described as a non‑operating transaction within the FY2025 reporting period.
Impact on Share Prices
Gotham asserts that the alleged non‑recurring sources artificially inflated the FY2025 earnings of both Sumitomo Pharma and Sumitomo Chemical, and that removing these sources would sharply reduce reported earnings. The short‑seller warned that the shares of both entities are “uninvestable” with a potential downside of 50 % to 100 %. Following the report, Sumitomo Pharma’s shares fell between 3.5 % and 4 % in Tokyo trading, while the broader Nikkei 225 index declined by 0.6 %.
Company Response
Sumitomo Pharma issued a statement indicating that it has no plans to revise its previously disclosed financial statements and that it has not confirmed any allegations of misstatement in its financial reporting.
Market Reaction Summary
The immediate market reaction was a modest decline in the stocks of Sumitomo Pharma and Sumitomo Chemical, reflecting investor concern over the allegations, though the broader market impact was limited to a sub‑1 % move in the Nikkei index.