Petrobras (PETR3;PETR4): Shares fall more than 5% on new proposals that threaten dividend and corporate governance

Shares of Petrobras (PETR3;PETR4) registered a sharp fall session this Monday (23). At 1:47 p.m. (Brazil time), common shares were down 5.12% (38.72 reais), while preferred assets were down 5.55% (35.75 reais).

The session is one of a downer for oil, but the drop after last week’s strong rally, with the Israel-Hamas conflict still on the radar, is not the biggest driver of the asset’s decline.

As Hulisses Dias, CNPI analyst and Sorbonne master of finance, points out, the biggest weight on today’s action is a proposal to eliminate the ban on the appointment of administrators under the State Companies Law, which was previously considered unconstitutional. Federal Supreme Court (STF). This change could open the way for politicians to enter the campaign.

“The market is afraid that people without technical skills, but who correspond to the interests of the government, will be appointed to the management of the company, as it happened in the past,” Diaz assesses.

Citi also noted that the change is negative from a corporate governance perspective.

Petrobras said today that its board has approved a review of the “policy for the appointment of senior management and supervisory board members”, subject to the approval of a statutory review corresponding to the subject at an extraordinary general meeting to be convened in due course.

In the Petrobras note, it is stated that one of the purposes of the review is “to exclude the prohibitions on the appointment of administrators provided for by Law No. 13,303/2016, which are considered unconstitutional through the occasional temporary guardianship in the Direct unconstitutional case 7,331-DF, which continues before the Federal Court of the Supreme Court” .


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For one source interviewed by Reuters on the subject, the idea is to “allow politicians to enter the day-to-day management of the company,” as has happened in the past, increasing the risk of interference in the company. “Unfortunately, a terrible setback,” the person added on condition of anonymity.

The source also described Petrobras’ move as “absurd” before the Federal Supreme Court (STF) makes a final ruling on the matter. When contacted, the state-owned company did not comment on the matter.

The statement also addresses a proposal to create a capital reward reserve as part of Petrobras’ charter review.

Citi emphasizes that the dividend policy remains the same, but the new reserve, according to Dom, could give the company more flexibility to pay or not pay future extraordinary dividends.

The review also seeks to explain that “when entering a management position, the company will consider hypotheses of a formal conflict of interest only in cases clearly provided for by law.”


Also for Goldman Sachs, the proposal to create a capital reward reserve increases the uncertainty in the forecast of payment of potential extraordinary dividends
and, in addition, leaves room for the appointment of politically prominent individuals
management positions. The bank saw the Petrobras charter as an additional layer of protection against interference in the company. “On the other hand, we note that the proposal also encourages compliance with the current policy, refusing to accept positions in case of violations,” the bank assesses.

Highlighting the fall in assets, Diaz also notes that Petrobras shares have risen strongly this year. “From October 5 to October 18, the stock rose by more than 20%, and it was also natural for there to be a correction,” he estimates.

Citi maintains a neutral recommendation on the stock given the lack of significant asymmetry between Petrobras and major global peers at current asset trading levels. The bank’s analysts note that the changes proposed by the board still need to be approved at the shareholders’ meeting, which should take place (at least) in 30 days. Goldman recommends buying assets.

(com Reuters)


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