Petrobras Loses Spot as Latin America's Top Company as Sale Spurs 25% Drop

Petroleo Brasileiro SA lost its spot as the biggest company in Latin America by market value to Vale SA after concern a planned $25 billion equity offering will dilute investors spurred a slump in the oil producer.

Petrobras’s market value fell 94 billion reais ($53.5 billion) to 253.1 billion reais this year as its preferred shares tumbled 27 percent. Vale’s market worth increased 6.24 billion reais to 254.9 billion reais after the preferred stock advanced 4 percent in 2010. Vale exceeded Petrobras in market capitalization once before, for a week in September 2007. The Bovespa index has dropped 2.5 percent this year.

“Indexes will reflect this loss, affecting passive funds and institutional investors,” said Eduardo Favrin, who oversees about $2.5 billion as head of equities for HSBC Global Asset Management’s Brazil unit in Sao Paulo. “But that’s not as important as the doubt surrounding the share sale, which is negative for the stock.”

The Petrobras offering may be delayed until next year, Valor Economico newspaper reported today, without saying where it got the information. Petrobras Chief Executive Officer Jose Sergio Gabrielli, Brazilian President Luiz Inacio Lula da Silva, Finance Minister Guido Mantega and Energy Minister Marcio Zimmermann failed to reach an agreement yesterday on when to hold the sale, the newspaper said.

Soros Sells

“Before the capitalization is sorted out, it’s unlikely that Petrobras will overtake Vale again,” said Daniella Marques, a partner at Rio de Janeiro-based Oren Investimentos, which manages 289 million reais.

Billionaire George Soros’s fund management firm sold all of its Petrobras stock in the second quarter as the equity offering loomed and BP Plc’s Gulf of Mexico spill raised concerns about offshore oil exploration. Soros Fund Management LLC, which oversees $25 billion, sold 9.1 million American depositary receipts representing Petrobras common stock and 5.88 million ADRs corresponding to preferred shares, according to a filing with the U.S. Securities and Exchange Commission.

Petrobras fell 3.3 percent, the most since June 24, to 26.78 reais at the close of trading in Sao Paulo at 4 p.m. New York time. Vale lost 0.9 percent to 43.90 reais.

Petrobras, based in Rio de Janeiro, needs to finance a five-year investment plan of $224 billion as it seeks to develop the largest discovery of crude in the Americas since 1976.

To contact the reporters on this story: Alexander Cuadros in Sao Paulo at acuadros@bloomberg.net; Felipe Frisch in Sao Paulo at ffrisch1@bloomberg.net

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