Petrobras shares plunged 21% on Monday, wiping out 70 billion reais ($12.7 billion) in market value, as Brazilian President Jair Bolsonaro again slammed its pricing policies after he replaced the state-controlled oil company's market-friendly CEO with a retired army general.
The sell-off, following a series of analyst downgrades, deepened after Bolsonaro said the company's fuel policy was only pleasing to financial markets and select groups in Brazil and should be changed as part of an effort to lower gasoline and diesel prices.
Overall, the last few days have marked a dramatic about-face for Bolsonaro, a right-wing populist whose interventionist instincts until now had been largely contained by economically conservative allies.
Shares in state electricity company Eletrobras also plunged on Monday after Bolsonaro said it would be the next sector in which the government would "stick its finger."
In comments to Brazil's Radio Bandeirantes on Monday, Joaquim Silva e Luna, the man tapped by Bolsonaro on Friday to take the reins from Roberto Castello Branco, floated the idea of a government fund, or "cushion", to lessen the effects of fluctuating fuel prices on consumers.
Bolsonaro doubled down on his criticism of Castello Branco, mocking his decision to social distance since the beginning of the coronavirus pandemic, the severity of which the president has repeatedly played down.
"Now, the current Petrobras chief executive, let's be very clear, has been at home for 11 months without working, working remotely. Now, the boss has to be on the front line," Bolsonaro said, adding: "This is for me unacceptable."
Bonds also hit
Credit Suisse, Santander, Scotiabank, Bank of America, Bradesco and XP analysts were among those who downgraded their recommendations on shares of Petroleo Brasileiro SA, as the Rio de Janeiro-based producer is known.
"A good reputation is hard to earn and easy to lose," BTG bank analyst Thiago Duarte said in a note to clients.
Petrobras' "all-important" pricing policy and its implications for cash generation and planned asset sales, particularly of its refineries, has clouded its debt reduction and dividend outlook, Santander analysts led by Christian Audi said in a note to clients, after downgrading their recommendation on the stock to "hold" from "buy."
Dollar-denominated debt issued by Petrobras also suffered hefty losses with the 2043 bond dropping 7.6 cents to trade at a seven-month low of 98 cents on the dollar, Refinitiv data showed.
Bolsonaro announced the nomination of Silva e Luna, a former defense minister who has been managing giant hydroelectric dam Itaipu, to replace Branco via a Facebook post after the close of trading on Friday.
The retired general, who lacks any oil and gas industry experience, said in the Radio Bandeirantes interview that he had not discussed and does not have an opinion on an eventual privatization of the company.
On Saturday, Silva e Luna told Reuters that the company needed to find "balance" in fuel pricing, considering the impact on shareholders, investors, sellers and consumers.
Brazil's securities industry watchdog CVM is expected to launch an investigation into the change of leadership on Monday, according to a source with knowledge of the matter.
Brazil's listed preferred shares had pared losses slightly to trade down 19.3% by mid-day, its biggest intraday loss since the pandemic hit Brazil in earnest in March.