Petrobras shares fell 21% on Monday, wiping out 70 billion reais ($ 12.6 billion) in market value, as Brazilian President Jair Bolsonaro again criticized the pricing policies of the oil company controlled by state after replacing its market-friendly CEO with a retired army general.
The sale, following a series of downgrades by analysts, deepened after Bolsonaro said the company’s fuel policy appealed only to financial markets and certain groups in Brazil and should be amended as part of an effort to reduce gasoline and diesel prices.
Overall, the past few days have marked a dramatic about-face for Bolsonaro, a right-wing populist whose interventionist instincts until now had been largely contained by economically conservative allies.
Shares of state-owned electricity company Eletrobras also plunged on Monday after Bolsonaro said it would be the next area the government “would pinpoint”.
In comments to Brazilian Radio Bandeirantes on Monday, Joaquim Silva e Luna, the general hired by Bolsonaro on Friday to take the reins from Petrobras CEO Roberto Castello Branco, launched the idea of a government fund, or “cushion,” to mitigate the effects of fluctuating fuel prices on consumers.
Bolsonaro doubled down on his criticism of Castello Branco, poking fun at his decision to social distancing since the start of the coronavirus pandemic, the severity of which the president has repeatedly downplayed.
“Now the current CEO of Petrobras, let’s be very clear, has been home for 11 months without working, working remotely. Now the boss has to be on the front line, ”Bolsonaro said, adding:“ This is unacceptable to me.
Bonds also hit
Analysts from Credit Suisse, Santander, Scotiabank, Bank of America, Bradesco and XP were among those who downgraded their recommendations on shares in Petroleo Brasileiro SA because Petrobras, based in Rio de Janeiro, is officially known.
“A good reputation is hard to earn and easy to lose,” BTG bank analyst Thiago Duarte said in a note to clients.
Petrobras’ ‘overriding’ pricing policy and its implications for expected cash generation and asset sales, especially of its refineries, have clouded its debt reduction and dividend outlook, Santander analysts said led by Christian Audi in a note to customers, after downgrading their recommendation on the stock from “hold” to “buy”.
Dollar-denominated debt issued by Petrobras also suffered heavy losses, with the 2043 bond falling 7.6 cents to trade at a seven-month low of 98 cents on the dollar, according to data from Refinitiv.
Bolsonaro announced the appointment of Silva e Luna, a former defense minister who managed the giant Itaipu hydroelectric dam, to replace Castello Branco via a Facebook post after negotiations closed on Friday.
The retired general, who has no experience in the oil and gas industry, said in the Radio Bandeirantes interview that he had not discussed and had no opinion on a possible privatization of the company.
Silva e Luna told Reuters news agency on Saturday the company needed to find a “balance” in the price of fuel, given the impact on shareholders, investors, sellers and consumers.
Brazilian securities watchdog CVM is expected to open an investigation into the change in leadership on Monday, according to a source familiar with the matter.
Brazil’s listed preferred shares edged down losses to trade down 19.3% at midday, its biggest intraday loss since the pandemic hit Brazil seriously in March.