Not much has gone right for Braskem (OTCPK:BRKMY) since I last wrote about Brazil’s leading basic chemical producer. Not only have the buyout talks between LyondellBasell (LYB) and Braskem’s controlling shareholder (Odebrecht, or ODB) collapsed, but Braskem is facing collapsing spreads as its products go through a cyclical downturn, an environmental problem with a salt mining operation in Brazil, and compliance issues that have led to the shares being delisted from the NYSE for the time being.
I’d previously written that a collapse in the LYB talks could push the shares back down in the low-to-mid $20’s, and with the added pressures of the environmental problem and the cyclical downswing, Braskem’s ADRs are now around $20. I do believe that the environmental issue is manageable, that management will get back into compliance and get the shares relisted on the NYSE, and that the business will likely bottom out in 2020, but what will happen with ODB’s bankruptcy remains a major open question. I do believe the shares are undervalued now below the low-to-mid $20’s, but there are a lot of issues for investors to digest, and I can understand why most investors would steer clear.
From BAK To BRKMY
Due to an inability to file its 20-F’s (basically the foreign version of a 10-K) for 2017 and 2018 in a timely fashion, Braskem shares have been delisted from the NYSE and now trade over the counter as “BRKMY”. The shares are still liquid, but these filings are a basic part of corporate governance and compliance, and it’s entirely valid for shareholders to steer clear of companies that can’t even manage this low hurdle.
That said, Braskem does seem to be trying to address and improve its governance issues. In addition to a pledge to be more prompt with relevant news items (something that
