Portugal Telecom SGPS shares dropped by more than 9 per cent to reach a record low of €0.73 ($0.86) in morning trading on Wednesday following reports on Tuesday that the company is being investigated for fraud.
According to the Associated Press, the company's stock price has lost around 80 per cent of its value over the past 12 months. A primary cause of the slump is believed to be the admission by Portugal Telecom last year that it invested nearly €900 million in commercial paper issued by Rioforte, a holding company of the Espirito Santo banking family. Rioforte and the family have since gone bankrupt.
Reuters reported on Tuesday that Portugal's prosecutor general has carried out searches at Portugal Telecom SGPS on suspicion of fraud related to an investigation into the company's financial investments. Details of the investigation remain under wraps, although AP said it is believed to be linked to the Rioforte loan.
Rioforte ultimately defaulted on the loan, which in turn brought about a revision in the merger terms between Portugal Telecom and Brazil-based operator Oi. That merger is now effectively being unwound as Oi is in the process of selling the Portuguese telecoms assets of Portugal Telecom to mobile and cable group Altice.
For its part, Altice is understood to be on the verge of launching a bond deal to finance its Portuguese deal. According to Reuters, the company still needs the backing of Portugal Telecom SGPS shareholders, which are due to vote on the sale at a meeting on Jan. 12. The holding company owns 25.6 per cent of Oi, which has already approved the sale.
Citing unnamed sources, Reuters added that Altice has to fund a €5.7 billion-equivalent ($6.84 billion) cash consideration, the majority if not all of which will be debt. The company signed an agreement with Oi in December to buy the Portuguese assets for €7.4 billion.
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