What happened
Shares of Companhia Paranaense de Energia (ELP 1.79%), also known as Copel, are rocketing 21.6% higher as of 11:55 a.m. after it was revealed the Brazilian state of Parana wants to privatize the energy company.
Reuters reports the newly re-elected governor of Parana, Ratinho Junior, sent the state-run utility a letter expressing his wishes to privatize it through a secondary follow-on share offering in a bid to raise money for the state.
So what
There's an investment saying that goes, "What the king sells, I buy" -- that is, privatization moves are often opportune times for an investment. No doubt the market is seeing the privatization of Copel as just such a good time to get in.
According to Reuters, though, the decision still needs approval from the state legislature, and while the governor has made the overture, actual legislation still needs to be drafted, which he intends to complete "in due time." Afterward, legislators will vote on the matter.
The Brazilian state will still own at least 15% of Copel if and when the privatization is completed.
Now what
Companhia Paranaense de Energia recently reported third-quarter results that easily beat analyst expectations. Revenue of $926 million was well ahead of Wall Street's forecast of $878 million, while earnings of $0.232 per share handily exceeded the anticipated $0.216 per share.
After this morning's action, the stock is up 16% year to date, but it had gained a lot of lost ground following the Q3 earnings report, when shares soared 12%. The stock is now within sight of the 52-week high it hit at the beginning of the month.
