The Incredibly Shrinking Companies Of Brazilian Billionaire Eike Batista
Eike Batista isn’t the man he once was. He’s actually a little richer, if not humbled.
This is the man who helped sell Rio de Janeiro to the Olympics in 2016, a massive and expensive undertaking that hopes to make the city a little more world class. Rio’s beautiful. But deadly. And poor. Roughly the population of the city of Boston live in shanty towns sprinkled throughout that gorgeous “carioca” hillside. That’s what the Rio residents are called — Cariocas. Batista is not one of them. He’s from Minas Gerais, a Texas sized cattle and coffee state to the north.
Batista is a man who has been riding a popularity wave for years as Brazil’s richest man, and the second richest man in Latin America after Carlos Slim, the wealthiest man in the world, according to Forbes.
He helped bring Brazil the Olympics. He created all these new companies and listed them on the BM&F Bovespa stock exchange. Investors clamored to him, thinking any billionaire has to know a thing or two about making money. He even went from No. 8 on the Forbes Top 100 World Billionaire list to No. 7 this year.
But this has been a tough year for the 55 year old billionaire. His companies just aren’t bringing home the bacon. Investors share some of the blame for this. They sunk tens of millions into his OGX Petroleo firm before it even started drilling for and discovering oil. Guess what guys? You’re paying for future earnings… These earnings are way in the future.
Now Batista is pulling a family of X companies off the market. LLX Logistica? Gone. Delisted this week. PortX, a port terminal company owned by Batista and formerly publicly traded: gone as of Monday from the stock exchange. Next up? Shipbuilder OSX and coal mining firm CCX likely to be delisted.
Out of the foursome, LLX is the largest and suffered the most losses. Its share price has gone from R$8.80 in 2010 when it launched to under R$3.20 today, which puts it about $1.10 a share. The market cap loss on LLX has been tremendous.
Delisting doesn’t mean that companies are a hair trigger away from falling apart. But clearly Batista’s idea of providing shareholder value has not come to pass. These are long term investments, after all, and long term for many investors means a quarter or two.
Nevertheless, Brazilians shouldn’t cry for Batista. The guy is worth $30 billion. Let’s assume he lost half of it, and was worth just $15 billion. If he put just $1 billion in a U.S. Treasury bond paying 2 percent interest a year, that’s a measly $20 million in interest.