Petrobras Bearish ADR Bets Climb to Record Amid Probe, Oil Rout

Petrobras Bearish ADR Bets Climb to Record Amid Probe, Oil Rout

By Julia Leite

2:18 PM BRT
April 8, 2015

(Bloomberg) Traders are increasing wagers that a $264 billion erosion in the value of Petroleo Brasileiro SA isn’t over yet.

Bets that the company’s American depositary receipts will drop have nearly doubled this year to a record 12.9 percent of shares outstanding as of Tuesday, according to data compiled by London-based Markit and Bloomberg. The ADRs are down 4.1 percent this year, after losing almost half their value in 2014.

Petrobras hasn’t released audited results since the second quarter of 2014 as it tries to account for corruption-related losses amid Brazil’s largest-ever kickback investigation. The delay, which has locked the company out of debt markets and prompted a change in the state-run oil producer’s top management, is deepening losses caused by years of missed production targets and selling imported gasoline at a loss as part of government policy to help stem inflation.

Under Chief Executive Officer Aldemir Bendine, who took over in February, Petrobras announced plans to sell $13.7 billion in assets this year and next to reduce debt and fund investments at a time oil prices have plunged. Once worth $310 billion at its peak in 2008, Petrobras is now valued at just $46 billion, about 13 percent of Exxon Mobil Corp.

A short sale is one in which stock is borrowed and sold, with the hope of profit by repurchasing the shares later at a lower price.

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