Bets against OGX Petroleo & Gas Participacoes SA, the oil producer founded by Eike Batista that has plunged 91 percent this year, climbed to a record as the former billionaire seeks cash to keep the company operating.
The number of short-interest contracts on OGX shares soared to 627.3 million yesterday, the highest level since Bloomberg started compiling the data in 2010. The ratio of borrowed shares, an indication of short selling, was 41.6 percent of stock available for trading, also a record and the highest among the 73 members of the Ibovespa benchmark gauge.
In a short sale, traders sell borrowed stock, anticipating the price will drop so they can profit by buying back shares at a lower price.
“Visibility is very low for the company,” Roberto Altenhofen, an oil and gas analyst at equity consulting firm Empiricus Research, said by phone. “It has a lot of debt and nobody knows if it has enough cash to meet the payments. As a result, more and more people short the stock.”
OGX’s short-interest ratio, which was at 11.3 percent one year ago, is approaching the 45 percent limit that exchange operator BM&FBovespa SA set in May. The Rio de Janeiro-based company’s shares were unchanged at 38 centavos at the close of trading in Sao Paulo. They plunged 27 percent in the previous two sessions as Batista challenged the company’s decision to exercise a $1 billion put option that he pledged last year.
Batista, who fell out of the ranks of the world’s billionaires this year as his companies’ stock prices plunged, is disputing the terms of the option and plans to take the matter to an arbitration court if an agreement isn’t reached within 60 days, according to a Sept. 9 regulatory filing.
The Brazilian entrepreneur is asking a group of investors for at least $250 million in fresh capital in an effort to avert bankruptcy, two people with direct knowledge of the matter said last week.
OGX’s cash fell 72 percent in the second quarter to $326 million, less than its average quarterly capital expenses in the past year, while debt rose to a record 8.7 billion reais, the company said in a statement last month.