What happened
Shares of Brazilian utility company Companhia Paranaense de Energia (Copel) (ELP -1.33%) are down 11% today, as of 12:31 p.m. EDT, after the largest Brazilian financial newspaper reported that the company intends to make a share offering, but it looks like the story is false.
So what
A news story broke in Valor Economico that Copel intended to raise about 4 billion Brazilian reais through an equity raise and that it had asked for banks and law firms to submit proposals by Friday.
Image source: Getty Images.
Management immediately sent a rebuttal letter stating that it has not done this and that if any future equity raises do take place, they will be formally announced like any other financial disclosure per securities law. It also said, though, that it is evaluating the possibility of a share issuance to fund the company's strategic growth plans.
Now what
This has been a tough week for Copel. Earlier in the week, an employee was arrested as part of a fraudulent-contract investigation that alleged said employee was artificially inflating the value of certain contracts with Copel to benefit other companies.
It seems that every state-owned business in Brazil is touched in some way by recent charges of corruption and fraud, which doesn't exactly give investors a lot of confidence in these companies. While the Copel has remained consistently profitable and pays a decent dividend that yields 4.6%, the thought the company can become ensnarled in a corruption and fraud probe is enough reason to stay away for a while until these investigations are concluded.
