Pirelli to take legal action against Grizzly Research over Russia report

Italian tire maker Pirelli has instructed lawyers to take legal action against Grizzly Research after the short seller published a report claiming the firm has a "close relationship" with Russia that "poses a threat to Western national security."

Pirelli has instructed lawyers at Gatti Pavesi Bianchi Ludovici Studio Legale Associato to "take action in all jurisdictions against those who have spread this false information" in efforts to "protect all shareholders and the company's good name," the company said in a Thursday statement.

It came after a Grizzly Research report claimed to have found a disparity between Pirelli's publicly disclosed earnings and those it claims to have found in Russian filings.

Many major tire makers, including Michelin , Continental , Goodyear and Bridgestone , were forced to accept major write-downs as they exited their Russian businesses in the wake of Moscow's full-scale invasion of Ukraine in 2022. Pirelli said at the time it would halt further investment in the country.

"General investor perception seems to be that Russia is a rather irrelevant part of Pirelli's current operations," Grizzly said. "Our research portrays a different picture."

The short seller, which last month made similar accusations of Russian links against German prosthetics firm Ottobock, claimed Russian filings imply that 10% of Pirelli's net profits come from its operations in the country. This compares to the tire maker's claim that just 6% of revenues come from Russia, the Middle East, Africa and India combined.

"We suspect this growth in the Russian business may be driven by demand from the Russian invasion of Ukraine," Grizzly said.

"We found that the tire center in occupied Ukraine listed on Pirelli's website serves the Russian military, and that Pirelli's employees, aware that the buyer was purchasing tires for Russian forces fighting in Ukraine, shared contact details for placing an order."

The short seller added that Pirelli's relationship with the Russian state "may pose security risks for the West," claiming Pirelli's Kirov factory operates in an industrial complex that also houses a Russian state-owned tire producer controlled by a military research institute.

"That same institute holds a 25% stake in much of Pirelli's Russian business. The only other minority shareholder, with a 9.99% stake, appears to have very close ties to the institute," it claimed.

"Pirelli seems to share critical infrastructure with the institute's factory, and we are concerned that, through this proximity and its corporate ties to the Russian state, Russia could gain access to technology that is mission-critical for advanced military equipment."

Pirelli's stock was volatile on Thursday. It initially fell as much as 13% before paring most of its losses and was last trading just below the flatline.

The Italian group said in a statement: "The content of the note from Grizzly Research does not reflect the truth.

"Pirelli reaffirms, among other things, that it does not produce tyres for military use, as is already known and was communicated long ago to the relevant Italian authorities.

"To protect all shareholders and the Company's good name, Pirelli has given a mandate to Gatti Pavesi Bianchi Ludovici Studio Legale Associato to take action in all jurisdictions against those who have spread this false information."