Friday StockTwits Banter: Portugal Telecom

It’s been an ugly week in world news. Most of the headlines are focused on the Malaysian Airlines plane that was shot down over eastern Ukraine and on the “mini-war” being waged in Gaza between Israel and Hamas. But the fallout from the Espirito Santo banking scandal continues to be a drag on Portugal Telecom (PT).

Last Thursday, Portugal’s Banco Espírito Santo gave investors a reminder of the “bad old days” of 2011–2012, when it looked as if Europe’s financial system would crumble, taking the EU down with it. Its parent company missed a debt payment, causing a mild selloff across the European banking sector.

The Espírito Santo family is Portugal’s wealthiest and most politically influential family—think of them as the Rockefellers or Rothschilds of Portugal—and their business empire sprawls across the Portuguese economy.  Well…the Espírito Santos essentially ran up debts they couldn’t pay and muddied the waters with a series of cross-company loans and guarantees. For example, Banco Espírito Santo is a 10% owner of Portugal Telecom…and another Espírito Santo entity (wink wink) happened to be on the receiving end of a large €900 million loan from Portugal Telecom…a loan that is now delinquent and my never be repaid.

I mulled over PT’s propects with the StockTwits community:

At what point does Portugal Telecom get too cheap to ignore? Not a fan of catching falling knives, but it has my attention. $PT $OIBR

— Charles Sizemore (@CharlesSizemore) Jul. 18 at 11:17 AM

@CharlesSizemore “Cheap” = nails against chalkboard for me. Someone is selling for a reason? Why?

— Tim (@Rudius) Jul. 18 at 01:20 PM

@Rudius $PT is tainted by the Espirito Santo scandal and may have to write off 900 million euros in loans.

— Charles Sizemore (@CharlesSizemore) Jul. 18 at 01:23 PM

@Rudius The question you would need to ask is, “If $PT lost the entire 900 million, would it still be attractively priced?”

— Charles Sizemore (@CharlesSizemore) Jul. 18 at 01:23 PM

@Rudius And on that count, I haven’t decided yet. But it definitely has piqued my interest.

— Charles Sizemore (@CharlesSizemore) Jul. 18 at 01:24 PM

@scottd There are some pretty HUGE questions about management conflicts of interest and such, but at some price, it becomes fully priced in.

— Charles Sizemore (@CharlesSizemore) Jul. 18 at 01:40 PM

 

Charles Lewis Sizemore, CFA, is the editor of Macro Trend Investor and chief investment officer of the investment firm Sizemore Capital Management. Click here to receive his FREE weekly e-letter covering top market insights, trends, and the best stocks and ETFs to profit from today’s best global value plays. 

  • Mike

    I wish I knew someone in PT to loan me few and then write it off. Will any one hold PT responsible for such apparent fraud.



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