What do you get when you combine investors’ current zeal for Brazil and commodities?The largest share issue ever in history.
Brazil’s Petrobras successfully sold $70 billion in shares, as part of a share issue to expand its business. To get a sense of how massive this issue was, keep in mind that China’s Agricultural Bank recently broke the record for the largest IPO ever, at $22.1 billion. Petrobas just sold more than three times this.
The record-setting stock sale, which was larger than what the company originally planned but fell short of the maximum it had filed to sell, had total demand of $87 billion, a source with knowledge of the deal told Reuters. The bids included 98 billion reais ($57 billion) from existing shareholders and $30 billion from institutional investors, a source with knowledge of the transaction said.
Sovereign wealth funds from the Middle East and Asia were among the investors buying into the offering, the source said on condition of anonymity.
The offering had “tremendous demand” from U.S. mutual funds, the source added.
What’s even more telling is the reason Petrobras is raising money.
The company is planning a massive push to develop its offshore energy assets, primarily the giant ultra-deepwater Tupi oil field. Tupi is the largest oil find in over 20 years, and is expected to require $270 billion to develop over 10 years. Petrobras could double its oil production in just four years.
So if you’re in the offshore oil & gas industry, you have to be pretty happy about today’s share issue as a vote of confidence. Your industry prospects remain extremely bright, and major investments will be made in offshore expansion, regardless of recent oil spill concerns.