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Share Price Of JBS SA ADR EACH REP 2 ORD (OTCMKTS:JBSAY) Falls Amid Bribery Scandal

Brazil Corruption Demonstration


Shares of the largest meat processor in the world, JBS SA ADR EACH REP 2 ORD (OTCMKTS:JBSAY), fell sharply after market regulators in Brazil revealed that they had initiated investigations to look into whether the company’s controlling shareholders engaged in insider trading. This comes a few days after another sharp fall caused by the emergence of reports indicating that the main shareholders of JBS had admitted to bribing the president of Brazil, Michel Temer, as well as other politicians.

Also affected were JBS’ bonds as they fell too following the downgrading of the credit rating by Moody’s Investors Service. JBS SA ADR EACH REP 2 ORD (OTCMKTS:JBSAY) has bonds worth approximately $750 million due in 2024. The bonds fell by 6.8%.

Initial public offer

The fall in the price of the company’s stock and concerns that the world’s biggest meat packer will be slapped with class-action suits in the United States now make it near-impossible for JBS Foods Unit to go ahead with the initial public offer in New York. And with J&F Investments SA, its parent company, still in plea negotiation with prosecutors, the uncertainty is impacting the shares of the company negatively.

“It’s hard to find a floor for JBS shares at the moment,” said Luis Gustavo Pereira, a Guide Investimentos’ analyst, in an interview with Bloomberg.

Illicit payments

In video court testimony, Wesley and Joesley Batista were shown confessing that they made illicit payments over a number of years. The family of the two brothers controls the SaoPaulo, Brazil-based JBS SA ADR EACH REP 2 ORD (OTCMKTS:JBSAY). This has led to calls for Temer to step down.

Temer has, however, denied that he committed any crimes. In a speech that was broadcast nationally over the weekend, Temer accused JBS of making millions of dollars in under 24 hours from currency trades following the revelations as the company was fully aware that the brother’s testimony would cause the depreciation of the Brazilian currency. On May 19, JBS disclosed that the currency transactions that were normal risk management activities and had adhered to company’s policy.

Plea deal

JBS SA ADR EACH REP 2 ORD (OTCMKTS:JBSAY) and prosecutors are yet to reach an agreement on how much the meat packer should pay in fines. The leniency deal is, however, likely to run into a wall due to public outcry. Already, there is an online petition urging for the plea deal to be scrapped.

On Monday shares of JBS SA ADR EACH REP 2 ORD (OTCMKTS:JBSAY) fell by 31.34% to close the day at $3.68.

I have no positions in any of the stocks mentioned, and have no plans to initiate any positions within the next 72 hours. All information, including any data, is provided without any guarantees of accuracy.

About the author: Jack arrived in the USA from Scotland over 20 years ago to study chemistry. His studies led him to a job with a Fortune 500 company and then to a stint as an analyst for a private equity firm. After the 2008 meltdown Jack returned to Scotland where he works full-time as an analyst and travel writer.