Petrobras Loses R$ 28 Billion in Market Value in One Day After Bolsonaro Changes Leadership of State-Owned Company

In Order for the Change in the Presidency of the State-Owned Company to Be Completed, the Appointment Still Needs Approval from the Petrobras Board of Directors, Which Has a Meeting Scheduled for This Tuesday (23).

Investors React Negatively to President Jair Bolsonaro’s Decision to Change the Command of Petrobras Last Friday, Appointing General Joaquim Silva e Luna, Current Director of Itaipu Binational, to the Presidency of Petrobras, in Place of Roberto Castello Branco, with State-Owned Company Shares Plummeting in Pre-Market Trading in New York This Monday (22), Indicating a Turbulent Opening Also in the Brazilian Stock Exchange.

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The Appointment Needs to Go Through Approval from the Company’s Board. Furthermore, the CVM (Securities and Exchange Commission) Is Considering Opening an Administrative Process to Investigate the Appointment of the General. This Scenario Will Result in Many Movements in the Stock Market Right at the Opening of Trading This Monday (22).

Around 8:30 AM Today, Receipts for Petrobras Shares Traded on the New York Stock Exchange Fell 16.92%, to US$ 8.35. The Brazilian Market Also Suffered a Decline Due to Previous Statements by Bolsonaro.

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In Brazil, Petrobras Preferred Shares Dropped More Than 6% on Bovespa, While Common Shares Fell 7.50%. With the Drop, the Company Lost R$ 28 Billion in Market Value in a Single Day, According to Data from Economatica.

XP Downgrades Recommendation for Petrobras Shares to Sell

XP Downgraded the Recommendation for Petrobras Shares to “Sell,” from “Neutral” Previously, While Revising the Price Target for the Stock to R$ 24.00, Down from R$ 32.00.

In a Report Distributed on Sunday, the 21st, Analyst Gabriel Francisco Attributed the Change to Negative Signals Regarding the Governance Outlook of the State-Owned Company and the Current Price Management with the Announcement of the President’s Replacement.

“We See This Announcement As a Negative Signal, Both from a Governance Perspective, Given the Risks to Petrobras’ Management Independence, and Because It Implies Risks That the Company Will Continue to Implement a Fuel Pricing Policy in Line with International Price References, Meaning, Reflecting Variations in Oil and Exchange Prices,” Says Francisco.

According to XP, There Are Many Uncertainties to Justify an Investment Thesis in Petrobras. “We Believe That the Shares Will Trade Going Forward at a Higher Discount Relative to Historical Levels and Other Global Oil Companies,” He Adds in the Report.