Eike wakes up today $2 billion poorer.
The financial crisis is taking a heavy toll on the companies of Brazil's richest man, which have already lost 49% of their stock market value since March.
247 – Today, businessman Eike Batista woke up as the Brazilian who lost the most in the storm that shook stock markets worldwide. Just three of his listed companies – OGX, LLX, and MMX – fell by 16,4%, 14,6%, and 9,7%, respectively. In market value, this means a reduction of R$ 6,3 billion in less than 24 hours. In total, Mr. X's losses on the stock market this year exceed R$ 50 billion. As a result, the market estimates that Eike's personal fortune has decreased by US$ 2 billion.
“I was terrified, but my blood is ice cold,” Eike said in an interview with Toni Sciarretta of the Folha de S. Paulo newspaper. To investors who are losing money on his companies' shares, he tries to appease them with a positive discourse. “I have to say that my companies have US$10 billion in cash and that we are going to start producing and generating revenue.” In fact, none of them have yet effectively begun the work they intend to do. Focused on oil, gas, and mining exploration, they are still much more a collection of good intentions than a group with concrete achievements to show. The market has shown that this is far too little to sustain the price of their shares.
“Panic struck the market. Money is cowardly,” Eike tries to justify, in the same interview, regarding the flight of investors from X shares. “They’re selling everything at rock-bottom prices, as if the world were going to end tomorrow,” he compares. He himself is prevented from buying his own shares, which would be an attempt to hold down their prices. However, since they are not yet profitable, the rules of the Securities and Exchange Commission (CVM) do not allow him to do so. It would be too much speculation for him to sell at the high and buy at the low. “I would be a mega-buyer,” he acknowledges, practically with his hands tied.
Why does Eike think his companies lost so much?
In response to Sciarretta's question, the businessman replied as follows:
"This happened six months ago, when they saw that Brazil was going to have high inflation and that it wasn't going to deliver on its promises. The same thing happened with China."
Yesterday, more than R$ 7,2 billion evaporated from its main companies listed on the BM&FBovespa stock exchange. Last week, its companies had already lost approximately R$ 3,3 billion in market value. In just over four months, the companies of the EBX Group – OGX (oil), MMX (mining), LLX (logistics), MPX (energy), OSX (shipyards) and PORTX (ports) – saw almost R$ 34 billion in market value disappear. This reduction is equivalent to three times Vale's net profit in the second quarter of this year. The eighth richest man in the world, according to Forbes magazine, has become poorer in recent days and expressed his irritation on Twitter, discussing his impoverishment: "I didn't lose anything! I didn't sell anything," he said.
Eike Batista's response is a pattern in the financial market: the loss is only realized when the stock is sold and the investor pockets less money than initially invested. But today, if he needed to sell off his assets, he would be US$2 billion poorer. For someone who, according to Forbes, had US$27 billion last year, does that really make much of a difference? The truth is that, for those who invested in the X shares of his companies, the 16%, 14%, and 9,7% losses yesterday for OGX, LLX, and MMX, respectively, certainly hurt. And their wallets.