Get ready. The world’s biggest share issue will be priced on Thursday – and the indications are it will be a resounding success, at least for the company, Petrobras, and its controlling shareholder, the Brazilian government.
Brokers and fund managers are suggesting the offer will be between 30 and 100 per cent oversubscribed. And expectations of such an oversubscription appeared to have boosted Petrobras’s shares: as of 1500 BST, they were outperforming the market in São Paulo – up 1.8 per cent.
Oil giant Petrobras aims to raise up to $77bn, including $43bn worth of shares it will issue to the Brazilian government in exchange for rights to 5bn barrels of oil. There has been uncertainty over the issue process and the massive investment programme it will help finance.
A 30-100 per cent oversubscription would not be overwhelming but, for an offer of this size, it’d be pretty significant.
However, for minority shareholders, the offer looks likely to deliver the dilution analysts have been predicting all along. The government’s overall stake – counting what it owns itself plus what is owned by public sector entities such as the BNDES, the development bank, and Caixa Econômica Federal, the savings bank – looks likely to rise from about 40 per cent before the offer to about 45 per cent afterwards.
Some investors may pitch in at the last minute today to avoid dilution. According to Nomura, MSCI Brazil index managers will have to sell $795m of other shares in the index to maintain a neutral weighting in Petrobras shares, while MSCI EM index managers will have to sell shares worth $1.18bn.
One broker in São Paulo said it was still not clear they would do so. “Private investors seem to be coming in strongly,” the broker told beyondbrics. “They’re after short-term gains. But institutions look to the longer term and they are a lot less certain about the up-side.”
Before today, Petrobras’s shares had lost 0.3 per cent during September and 29 per cent since the start of the year.
Petrobras’s board will meet at 2300 BST on Thursday to vote on the final offer price.