“In many ways it’s a mouthwatering affair. But be careful, it’s also risky.”
Thus reported the Wall Street Journal, 30 years ago, the listing of YPF on the New York Stock Exchange.
The American newspaper gave important space in its pages to the sale of 160 million class D shares that the Argentine government would sell in the United States. Economy Minister Domingo Cavallo made a special trip to Manhattan.
In 1993 Argentina was the leading economy of the emerging world. He had pulverized hyperinflation, opened his economy to a new world after the fall of the Wall, and was now looking for fresh capital for his largest company, YPF. At the same time, more or less in those same days, Carlos Menem made a state visit to Washington. The president was Bill Clinton. Only Raúl Alfonsín and Arturo Frondizi had enjoyed that treatment. Menem stayed at Blair House, a guest house across from the White House.
“The flotation of YPF took place after the reorganization of the company by José Pepe Estenssoro”adds Cavallo to that context. “The company’s previous three financial statements had already come out positive.”
Estenssoro was the president of YPF and in charge of that process. In November 1992 the law on privatizations was passed and the development of the company began with its listing on the Stock Exchange.
When it came time for bids in July 1993, the country was growing at Chinese rates, offering dollar yields, and there was global liquidity. An ideal cocktail to attract capital.
It was not strange then that ‘the notebook’, where amounts and bidders were recorded, coordinated by First Boston and Merrill Lynch, was snapped up and everyone ran to appear.
In 72 hours it was necessary to go to the market.
First there was a meeting the previous Saturday in Economics (Roque Fernández president of the Central Bank; Martin Redradohead of the Securities Commission, and the secretaries of the ministry daniel marx AND Horace Liendo).
The next day Cavallo went to New York. He went straight to the offices of First Boston.
There was a bottleneck around one specific issue: the share price at the exit.
“Banks wanted to offer well under $19”recalls Marx. And Economy wanted them to pay $20 or more. A peso was worth a dollar.
“I spoke to Pepe Estenssoro and Mingo – comments Redrado -, the important thing was that the fee did not drop from 19 dollars after the start, in the following days”.
YPF went public on Monday via a “conference call” from the US. A reception was organized at the Buenos Aires Stock Exchange, where a screen was placed showing Cavallo on a projector. In the living room ‘there was not a pin’they would say from the podium. It was all live.
45.6% of YPF’s share package has been listed on the market. At the end of the year, the State no longer exceeded 20%. The demand was voracious.
The share price started at $19.
Menem came out the other day to say on the radio that he had decided that number, thus starting a fray, perhaps imperceptible at the time, with Cavallo and his team. The minister had been the figure of the electoral triumph of the PJ in 1991 and his name now had a political projection within the Peronism of Buenos Aires. Was Menem already feeling jealous?
Consulted for this article, the former minister does not remember that coming and going. But he met the president and head of the IMF, Michel Camdessus, that same day. Argentina was under an expanded facilities program.
Bankers knew they bought YPF ‘cheap’: shares jumped 15% in the New York secondary market on its debut. After fluctuating between a low of $21.1-2 and a high of $22.12, the price of each share closed at $21.87.
The next day, The Wall Street Journal said the initial public offering, IPO in the parlance, was “the largest IPO in the history of the North American secondary market to launch shares of a new company”.
First Boston and Merrill Lynch uncorked: they charged 1% to bring ‘the notebook’.
“The only precedent for such a large initial launch in volume had been the listing on the US market of the companies privatized in England”said a bank report following Thatcher’s privatization experience in 1980s Britain.
Menem’s government allowed provinces to buy YPF shares with unpaid hydrocarbon royalty bonds that he had granted them (for about $6 billion) as soon as he began his term. Santa Cruz, where Néstor Kirchner was already governor, a plenary session with 600 million dollars of those bonds was played for all or nothing with the shares of YPF. Kirchner won. A few years later, after Tequila, the stock nearly doubled ($600 million was now equal to $1.2 billion). The stock has not recovered to its pre-pandemic level today (it fell 7.8% on Friday and closed at $10.65).
“That 30 years later YPF is listed in New York is reinsurance for its control and that what happened in Airlines does not happen”reflects today Daniel Montamat, former president of YPF in 1988-1989. For the economist and point of reference in the energy sector, this can be seen in the F-20 (a form required by the US Securities and Exchange Commission for listed companies), which the company itself had already warned in 2012 about “limits to local market fuel prices could adversely affect operating results”. The same thing that the Wall Street Journal had advanced 30 years ago when Estenssoro brought YPF to market.
In the print edition, data for the US YPF stock price was released without its price update on Friday.
Charles Arterburn is a seasoned business journalist for News Rebeat, where he provides comprehensive coverage of the latest trends and developments in the world of finance and economics.