Petrobras ADRs traded in New York slump over 9% after Bolsonaro nominates new CEOny’s CEO

RIO DE JANEIRO, BRAZIL – Petrobras ADRs (PETR4;PETR3), depositary receipts traded on the New York Stock Exchange slumped over 9% on Friday night, February 19th, after President Bolsonaro announced the nomination of General Joaquim Silva e Luna as the new CEO of the state-owned company on social networks.

At 8:10 PM (Brasília time), the company’s shares were trading down 9.25% in the after market, quoted at US$9.12, after a 7.12% drop in the regular trading session.

Acqua Investimentos partner Bruno Musa points out that General Silva e Luna has no experience in the oil and gas sector, which is why the market’s reaction is worse: “Political interference is never well regarded by the market and investors are already reflecting this,” he says.

Roberto Attuch, Ohmresearch CEO, says that “it is no overstatement to say that Petrobras has become uninvestable.” According to him, this is a “lose-lose” situation.

“Petrobras is not going to benefit from the oil price rebound, no matter the outcome of this case. And since it has no strategy in renewables, quite the opposite, the medium-term argument is compromised,” assesses Attuch.

For Alex Agostini, chief economist at Austin Rating, this is one of the most damaging moves ever made by President Bolsonaro with respect to the management of Petrobras.

“The repercussion is very negative. Surely on Monday, Petrobras’ shares will plummet even more because it is clear that this decision stems from the fact that Petrobras has the federal government as its majority shareholder. But it is also a publicly traded company, so it has to meet the market, it has to abide by compliance rules,” says Agostini.

“The interference is clear and evident, particularly in Petrobras’ systematic price adjustment, which the president has always been opposed to. It should be noted that in 2018 Bolsonaro supported the truckers’ strike and then had strong support from truckers in the election. He has his eye on the truckers’ support in the 2022 election,” adds Agostini.

Sérgio Vale, chief economist at MB Associados, points out that the latest news shows that Petrobras is once again experiencing political interference, as occurred in the past. “We already experienced such interference in the Dilma government in the past, which resulted in tremendous losses for the company. The new CEO will be urged by the market to make adjustments so that Petrobras will not suffer a further drop in share price in the future,” he says.

Agostini also recalls that Castello Branco was appointed by Economy Minister Paulo Guedes. “Bolsonaro wanted to replace Castello Branco before, but Minister Paulo Guedes talked him into retaining him, pointing out the problems he would have if he changed the state-owned company’s leadership. We know that the interest rate market, the exchange rate, and the stock market may take a sharp turn for the worse on Monday,” he says.

Vale agrees that the switch in the command of Petrobras strengthens the perception that Guedes is weakened and Bolsonaro is focused on reelection. “How will Bolsonaro react to this? The market is familiar with the alternative of holding down prices, and it will go very wrong. This also shows Minister Guedes’ powerlessness. In 2019 he managed to revert this opposition, but not now. This also reflects the country’s management challenges over the next two years with a president focused on reelection,” says the MB economist.

Source: Infomoney