Copa Holdings SA slumped as Venezuela cut ties with Panama after it urged mediation to end four-week-old protests, prompting Citigroup Inc. to lower the airline’s shares to the equivalent of hold.
The carrier’s U.S.-traded shares tumbled 7.5 percent to $124.76 at 2:33 p.m. in New York after earlier dropping 10 percent, the most in 13 months. Copa extended its decline in 2014 to 22 percent.
Citigroup reduced its target price on the shares to $148 from $170 today and cut its rating to neutral from buy. Panama City-based Copa has $487 million trapped in Venezuela bolivars as currency controls leave the airline unable to withdraw the cash. Gustavo Vargas, a spokesman for Copa, didn’t immediately reply to an e-mail message seeking comment.
The “more negative political posture materially increases cash repatriation and operating uncertainties for Copa,” Citigroup analyst Stephen Trent wrote today in a report.
Venezuela President Nicolas Maduro cut diplomatic and commercial ties with Panama yesterday and accused President Ricardo Martinelli, who backs mediation by the Organization of American States, of “scheming” against the government. Martinelli said on his Twitter account that Maduro’s announcement surprised him and that he wants to see peace restored to Venezuela.
Airlines had $3.3 billion in bolivars at the official rate trapped in Venezuela on Jan. 10 as Maduro’s government tightened the supply of dollars, according to the International Air Transport Association.
Duane Pfennigwerth, an analyst at Evercore Partners, said in an e-mailed report today that the cash trapped in Venezuela “is more than priced” into the stock price. “The recent $800 million decline in Copa’s equity value has more than discounted this outcome,” he wrote.