beyondbrics

Petrobras’s share offer just got a little more intriguing. The Brazilian oil giant has announced that it will add another 376m shares to its offering, under an over-allocation option. That could take the offer to a total of $79bn – three-and-a-half times Agbank’s world record IPO earlier this year.

The question is why. Does Petrobras think the share offer is going well or badly?

The bearish view is that demand is so low that Petrobras needs to sell the extra shares to finance its $224bn investment plan. (Thursday’s FT suggested why this may be the case: the process has dissatisfied many investors, in Brazil and the US.)

But an analyst told beyondbrics that such pessimism doesn’t stack up. As the book closes next Thursday, Petrobras is unlikely to have an idea of demand until next week. So the over-allocation decision could reflect that a big buyer has come forward during Petrobras’s global roadshow – a sovereign wealth fund, perhaps, or a Chinese oil company or bank.

That idea has traction in Brazil. A fund manager told Bloomberg that a big buyer may have expressed interest, while an analyst, quoted by Brazil’s Exame magazine, said that the sovereign wealth fund involved could be Iranian or Chinese.

There’s another possibility: Petrobras could be bluffing, implying there is a big buyer to create some excitement around the share offer. But that, the analyst told beyondbrics, “would be a dangerous game to play”.