Petrobras Jumps on $78 Billion Share Sale Demand Bets

Petroleo Brasileiro SA, Brazil’s state-controlled oil company, rose the most in three weeks in Sao Paulo on speculation demand for a $78 billion share sale will surpass the amount on offer.

Petrobras gained 3.2 percent, the most since Sept. 3, to 26.80 reais as of the 4 p.m. New York time close.

The company, based in Rio de Janeiro, is planning to sell as many as 2.718 billion common shares and 1.983 billion preferred shares. Under the terms of a Sept. 3 prospectus, 80 percent of the shares will be offered to existing shareholders as of Sept. 10 on a priority basis. Petrobras plans to issue about $42.5 billion worth of stock to the government in return for the right to develop offshore oil reserves.

Other current holders, including state-run financial institutions such as development bank BNDES, will likely buy as much as they’re entitled to, said Tim Hall, who helps manage about $750 million at Deltec Asset Management. Demand for remaining shares may exceed the offer by as much as three times as Deltec and other non-priority investors buy stock, Hall said.

“There is no question there will be full take-up from current holders,” Hall said by phone from New York. “Demand for the deal has been pretty good. I think the discount will be minimal.”

Investment Plan

Petrobras is raising money to finance a $224 billion investment plan through 2014 as it develops offshore fields such as Tupi, the largest discovery in the Americas in three decades. After the sale, investors will return to focusing on “fundamentals” rather than earnings-dilution concerns that helped the stock slump 29 percent this year through yesterday, Hall said.

“Instead of focusing on Petrobras the deal, they can focus on Petrobras the company,” he said. “The long-term prospects for Petrobras remain pretty sound.”

Petrobras may post more gains after completing the world’s largest share sale, said Robbert Van Batenburg, the head of equities research at Louis Capital Markets in New York.

“It has massively underperformed the oil sector,” Batenburg said in a telephone interview. “The stock will make up some ground relative to the group. You have an oil company with a superior growth profile.”

Before it's here, it's on the Bloomberg Terminal. LEARN MORE