Shares of Copel Plummet Following Unverified Report of Share Issuance

The company has enough issues to deal with already -- it doesn't need fake news about a share issuance making it worse.

Tyler Crowe
Tyler Crowe
Jun 8, 2017 at 12:49PM
Energy, Materials, and Utilities

What happened

Shares of Brazilian utility company Companhia Paranaense de Energia (Copel) (NYSE:ELP) are down 11% today, as of 11:16 a.m. EDT, after the largest financial newspaper in Brazil reported that the company intends to make a share offering. However, it looks like the story is false. 

So what

A news story broke in Valor Economico that Copel intended to raise about 4 billion Brazilian reais through an equity raise and that it had asked banks and law firms to submit proposals by Friday. 

Hydroelectric dam in detail

Image source: Getty Images.

Management immediately sent a rebuttal letter stating that it has not done this and that if any future equity raises do take place, they will be formally announced like any other financial disclosure per securities law. It also said, though, that it is evaluating the possibility of a share issuance to fund the company's strategic growth plans. 


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Now what

This has been a tough week for Copel. Earlier in the week, an employee was arrested as part of a fraudulent-contract investigation that alleged said employee was artificially inflating the value of certain contracts with Copel to benefit other companies. 

It seems that every state-owned business in Brazil is touched in some way by recent charges of corruption and fraud, which doesn't exactly give investors a lot of confidence in these companies. While the Copel has remained consistently profitable and pays a decent dividend that yields 4.6%, the risk that the company can become ensnarled in a corruption and fraud probe is reason enough to stay away for a while, at least until these investigations are concluded.