A threatened $31m lawsuit may be just a fleabite for a man once valued at $30bn – but it’s undoubtedly another problem that Eike Batista doesn’t need. Formerly Brazil’s richest man, Batista’s net worth has dwindled to around $200m, reports Bloomberg, as his oil-to-entertainment empire teeters on the edge of collapse, owing billions to Brazil’s banks.
Much-hyped oil and gas discoveries by OGX, his flagship company, have proved to be flops and the many retail investors who helped finance his ventures are furious. Hence the pending lawsuit that accuses him and other directors of insider trading and releasing misleading information about the firm’s prospects.
What the commentators said
Batista is a victim of his own ambition, which led to his overextending himself on several simultaneous capital-intensive projects in areas such as natural resources and infrastructure, says The Economist. But he was helped along by “the wave of euphoria about Brazil’s prospects” that convinced others to fund his plans. Amid the commodity boom, this “smooth and charming salesman” had little difficulty securing equity from investors and financing from most major Brazilian banks, to whom his companies now owe billions.
Consequently, “his demise is also a broader sign of the tougher times ahead for Brazilian businesses now that the excitement over commodities is waning”, said Joe Leahy and Samantha Pearson in the FT. In a less optimistic era, capital for much-needed private investment – Brazil’s greatest weakness – may be scarce.