JBS’s shares dropped 31.34% on May 22, 2017, affected by the political corruption scandal shaking the country following JBS owner Joesley Batista’s plea bargaining, and possible insider trading by members of JBS and J&F, the parent holding. The decline represented a value of BRL7.4 billion (US$2.26 billion) on the day, and the company is reported to have already lost around BRL9.6 billion (US$2.93 billion) over the previous week.

The fall is attributed to a series of events following JBS plea bargaining, including the company’s refusal to accept paying the BRL11 billion (US$3.36 billion) in fines; Michel Temer’s, the Brazilian President, allegation that the recordings of the conversation between Joesley Batista and himself have been edited; and the fact that JBS bought great quantities of U.S. dollars on the eve the scandal of tape recordings broke out – the U.S. dollar shot up +8,15% the next day, representing the biggest increase in the past 18 months. Further, credit rating agency Moody’s has downgraded JBS and its U.S. subsidiary to Ba3 from Ba2 and placed the ratings of both companies “under review for further downgrade”. 

Brazil’s Securities and Exchange Commission (CVM) told local media it is investigating the alleged irregularities and the use of privileged information in future dollar and stock negotiations. In a statement, JBS said it “carefully manages its exposure to currency fluctuations and commodities on a daily basis” and that it uses financial tools to “minimise the currency and commodity risks arising from its debts and operations, receivable in dollars”.

Sources: G1/Financial Times