Brazil workers may request Eletrobras shares using severance fund

From Friday (Jun 3) to next Wednesday (8), Brazilian workers with registered employment may express interest in buying shares from electric utility Eletrobras using the money from their FGTS account—Brazilians’ severance fund, or Guarantee Fund for Length of Service. The Rio de Janeiro–based firm is undergoing privatization.

The operation does not represent the purchase of the shares, as the actual sales will only take place after the auction of the state-run utility is held. The procedure comes in a bid to gauge interest in them. Following the company’s privatization, the government plans to slash its share in Eletrobras from 72 to 45 percent at the most.

Brazilian workers may choose to invest from BRL 20 thousand to BRL 50 thousand from their FGTS in the transaction, also considering a limit of 50 percent of the amount available in the fund. Thus, workers with a balance of BRL 40 thousand may only use up to BRL 20 thousand to buy Eletrobras shares. If an employee has more than one FGTS account, they can use up to 50 percent of the balance of each.

Before filing a request, workers must authorize financial institutions to check their FGTS balance and set aside the values selected for investment. This can be done via a smartphone application. Simulations are also available.

Pricing

The price of each share on offer will not be determined until June 9, one day after the end of the period of requests. Yesterday (2), the state-owned company’s share closed at around BRL 43 on the stock exchange, but the offer value will only be set after negotiations between investment funds, banks, and Eletrobras. Individuals will not participate in the process.

Eletrobras has allocated BRL 6 billion to the sale of shares for investors planning to use money from their FGTS. This is only one among the several ways in which natural persons may take part in the auction, expected to occur later this year. If someone plans to buy shares on the same day as the auction without resorting to their the FGTS, they may disburse BRL 1 thousand to 1 million each.

The investment has a minimum term of one year. Brazilians purchasing Eletrobras shares using their FGTS account will have to wait at least 12 months to dispose of them. After the sale, the money goes back to the FGTS account and can only be withdrawn under specific circumstances currently in effect.