Eike Batista’s OGX Petroleo & Gas Participacoes SA is expected to extend the declines even after the statement made by the Brazilian billionaire that bearish speculators will regret the wagers in future. On 18th March, OGX shares on loan increased to 260 million, marking the highest level since October, 2010. On 22nd March, it slipped to 258 million. In the last 12 months, the total amount of loaned stock increased more than thrice and it currently represents 20% of the estimated free float of the shares available for trading. Traders sold the borrowed stock during a short sale, with an anticipation that price will go down so they can profit by buying back the shares at a pretty low price.
The Brazilian exploration company has declined by around 86% in the last 12 months and on 22nd March, closed at a record low value. Many investors feel that Batista’s businesses are losing the access to proper financing. In the last year, the personal wealth of the 56-year old Brazilian billionaire had gone down by $25 billion, mainly because of the decline experienced by market value of his companies.
Aloisio Lemos, who works as an Analyst of Agora Corretora stated that the picture for Batista owned companies, is much worse than many expect. Agora added that it is obvious for the investors to look out for alternatives.
For the 3rd straight day, OGX shares have declined and currently, those are priced at 2.24 Reais per share, after experiencing a tumble of 1.3% on today. Volume of trading was 81% of the last 3 months’ full day average. On the other hand, the 30-day volatility has increased to 104%, marking its highest value since last August.
Off late, Batista himself has been seeking to sell the stakes, thereby scaling back projects as debts rise and missing production targets continuously has dimmed the confidence among the investors. Creditors are already demanding that Batista should boost collateral on some of the debts, as far as people with direct knowledge on this matter are concerned.
Incidentally, loaned shares of OGX experienced a rise of 288% in the last 12 months and this is the 9th biggest for the Bovespa Index, the benchmark gauge of Brazil. The oil services and shipbuilding unit of Batista, OSX Brasil SA’s lending interest is currently at 2.66 million shares, 3.3% of estimated free float.