Short seller grills Pirelli on Russian ties

Grizzly Research alleges the tire maker earns more profit from Russia than investors realize and faces potential sanctions risks.

Shares in Pirelli fell sharply after short seller Grizzly Research alleged the Italian tire maker was misleading investors over its Russian revenues and may have undisclosed ties to state-linked entities.

The stock dropped more than 13% in the hours following the report’s release, before recovering after the company issued a statement rejecting the allegations.

In the Thursday report, Grizzly claims that Pirelli’s Russian operations account for “about 10” of the company’s net income, despite the company’s statements following the invasion of Ukraine that it would halt new investment in the country.

The short seller also claimed that Russian state influence over Pirelli’s local operations extends beyond formal ownership stakes and points to historical relationships between the company and state-linked entities that could expose it to geopolitical, reputational, and governance risks.

Grizzly further alleged that Pirelli representatives at an authorized dealer in Russian-occupied Donetsk were willing to facilitate tire purchases for a Russian military unit, assertions that could raise questions about sanctions compliance if substantiated.

Pirelli rejected the allegations, saying Grizzly’s report “does not reflect the truth” and reiterating that the company does not manufacture tires for military use.

The company said it complies with all applicable sanctions and regulations and denied claims that it manufactures products for military use.

Pirelli also announced plans to pursue legal action against those responsible for disseminating what it described as inaccurate information.

The news comes just days after fellow short seller Andrew Left, founder of Citron Research, was found guilty of securities fraud. Prosecutors argued Left used research reports, television appearances, and social media posts to influence market sentiment before rapidly closing positions.

The company’s stock fell 13.66% in the hours following the release of Grizzly’s report, bottoming out at EUR5.31. However, the stock clawed its way back above EUR6.00 once news of Pirelli’s response broke. The company’s shares are up 3.91% year-to-date, as of 10:00 EST on Friday, June 4.

For shareholders, the dispute highlights the growing importance of geopolitical risk in assessing multinational companies. Even where operations remain legally compliant, investors are increasingly scrutinizing exposure to Russia and other politically sensitive markets due to potential reputational, regulatory, and sanctions-related concerns.

The controversy also raises broader questions about corporate disclosure.

If investors conclude that a company’s geographic reporting does not provide sufficient visibility into underlying earnings exposure, pressure may build for greater transparency around operations in higher-risk jurisdictions.

Attention will now turn to whether Grizzly’s claims gain traction with investors, regulators, or other stakeholders.

While Pirelli has vigorously denied the allegations, the episode underscores how short-seller reports can rapidly reshape market perceptions and place a company’s business practices under intense scrutiny.

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