Eike sends stock market crashing to its worst level since April 2009.
In addition to that, which triggered a ripple effect on Petrobras, Vale, and private banks, a 2% drop in industrial production and a surprise meeting between President Dilma and Minister Guido Mantega caused the market to fall by 4,24%, with 69 out of 71 stocks closing in the red; Bank of America Merrill Lynch (BofA) cut the target price for OGX Petróleo e Gás shares from R$1 to R$0,10.
247 – In the thick dust raised by the collapse of the X companies, belonging to former billionaire Eike Batista, the Brazilian stock market plummeted this Tuesday, the 2nd. Of the 71 stocks listed on the Bovespa Index, only two registered gains, with quite significant negative figures, among the other 69 stocks. The Bovespa index fell 4,24%, reaching 45.228, its worst mark since April 2009.
The first, second, and third largest declines were, not coincidentally, OGX (oil company), MMX (mining company), and LLX (logistics), with losses of 19,64%, 17,29%, and 11,24%, respectively. Shares of 'OG', as surviving employees call Eike's parent company, are now worth no more than R$ 0,45, having been quoted at around R$ 20,00 a year ago. As a result of the successive falls in recent months, Bank of America Merrill Lynch (BofA) cut its target price for OGX Petróleo e Gás shares from R$ 1 to R$ 0,10. The recommendation is to sell the shares.
Combined with the information that industrial production fell 2% in May compared to April, the push from this latest stage of Eike's downfall swallowed the value of Petrobras, which began to be hit by doubts about the technology needed to extract oil from the pre-salt layer. Since Eike failed, it is speculated that this technology either does not yet exist or makes commercial exploration in extremely deep waters unfeasible. The state-owned company's stock thus fell 4,14%, reaching its lowest historical value: R$ 15.39.
The dramatic turnaround experienced by the mining company MMX, of no less than 17,29%, indicating that the market considers the same fate for it as for OGX – insolvency – dragged down Vale's shares as well. They fell 4,33% and 3,36%, in the two modalities offered to the market.
The entire downward spiral, with its ups and downs, of the X companies also contributed to losses among the major banks Itaú and Bradesco, which had loaned billions to the former tycoon. Shares of Itaúsa, Itaú's holding company, plummeted 4,64%, while Bradesco's fell 3,19%. On a gloomy day, the light, though not of gold, shone on Eike.