Short sellers responded to billionaire Eike Batista’s threat that they’d be burned for betting against his companies by ramping up wagers that OGX Petroleo & Gas Participacoes SA will sink.
Shares on loan of oil producer OGX climbed to 267 million yesterday, the highest level since Bloomberg began compiling the data in October 2010, from 258 million on March 22. The amount has surged from 65 million shares a year ago, representing more than 21 percent of those available for trading, the second highest ratio among all stocks on the Bovespa index, the data show.
Batista, whose personal wealth has fallen almost $26 billion in the past year as the market value of his companies sank, said in March 23 posts on his Twitter account that “rumors and gossip are the tools of short sellers,” who will be “caught with their pants down.” OGX, his biggest holding, has tumbled more than 80 percent in the past 12 months, closing at a record low on March 22, as oil output missed estimates and concern mounted that Batista is losing access to financing.
Taunting short sellers is a mistake because it creates tension between the company and investors, said Joao Brugger, who helps manage 300 million reais ($150 million) at Leme Investimentos Ltda. including OGX shares. “It would be better to release a filing to the market instead of using social media,” he said by phone from Florianopolis, Brazil.
In a short sale, traders sell borrowed stock, anticipating the price will drop so they can profit by buying back the shares at a lower price.
OGX rose 0.4 percent to close at 2.30 reais in Sao Paulo trading. The company is scheduled to release fourth-quarter earnings today. Analysts estimate it posted an adjusted net loss of 302.5 million reais, its 10th consecutive quarterly loss excluding items, according to data compiled by Bloomberg.