Last week, Venezuelan stocks fell when President Hugo Chavez said he would nationalize the telephone company CANTV and all of the electric companies including Electricidad de Caracas, a publicly traded utility majority owned by US based AES Corporation. At the time, the Head of the Venezuelan Securities Regulator, the Comision Nacional de Valores, urged investors not to sell until they knew the details.
Well, today Electricidad de Caracas fell an additional 10.5% when investors actually learned about these details that were supposed to impress them. You see, when Chavez first announced the nationalization of the electric company he said nothing about compensation, while later the Minister of Finance said there would be “fair” compensation to shareholders. But today, the Minister of Energy and Mines announced that the Government would “only” purchase control of Electricidad de Caracas by buying AES’ stake of 87% in order to “protect” minority investors from capitalistic AES. These shareholders would thus become “partners” of the Government in this utility now run under the social precepts of XXIst. Century Socialism.
The whole thing was absolutely eerie as the Minister described the process as one to protect these shareholders from the hands of this horrible company saying they would not “affect” the interests of these small investors. So far the shares have fallen 30% since the announcement and it is likely that the slide will continue tomorrow when the market opens and the news is known by more shareholders.
What is remarkable, even if it may seem moot, since it is clear the Government could by now care less about the law, is that the Venezuelan Capital Markets Law requires that if you are going to purchase a stake like what AES has in Electricidad de Caracas, that you make an offer for 100% of the company, precisely in order to protect minority and small shareholders. How the Chavez administration will get around this legal requirement by issuing a “Nationalization Law”, as described by Ramirez, is unknown to me, but nothing surprises me any longer.
Last year, Electricidad de Caracas sold some US$ 90 million in new shares to its employees and small investors in an offering hailed by Government officials. I guess in the end it will be AES that made money by being smart last year and being bought off by the fake revolution this year. The small Venezuelan shareholders will simply be screwed by the revolution.
What else is new!
The Devil's Excrement 
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