(Bloomberg) -- For a while, it looked like Grupo Elektra, one of Mexico’s largest appliance retailers, was set to become a zombie stock. The shares stopped trading in July at the request of its controlling holder. When regulators wanted to lift the ban, the company pushed to extend it, setting up a tug-of-war and leaving investors in limbo.
Then on Monday trades began appearing — trades that valued the shares at 50% less than where they were in July. That low a bid would normally trigger a circuit breaker at the stock exchange, but securities regulator CNBV ordered an override, defying a court order won by the lawyers for Elektra’s controlling shareholder, billionaire Ricardo Salinas Pliego.
By the end of the session, Elektra shares tumbled 71%, vaporizing $5.5 billion of Salinas’ fortune. The blow — which represents half of his wealth — knocked him off the world’s top 500 wealthiest list.
Salinas himself has blown off the debacle, joking about the hit to his wealth. On Wednesday, as he flew from Mexico City to Buenos Aires in his private plane, he posted on X “this poverty that they say I’ve fallen into doesn’t feel too bad.” The prolific social media personality — with 1.9 million X followers — had already derided those commenting about his wealth, on paper, as idiots, adding that the decline was due to his decision to privatize the stock.
On Friday, the stock surged as much as 34% in afternoon trading, triggering brief trading halts due to the volatility, before paring gains. It still ended the week down nearly 70%, closing at around 288 pesos per share compared to its last price in July of 945 pesos.
Luciano Pascoe, a spokesman for Grupo Salinas, wrote on X on Tuesday that it was natural for the stock to fall given the company’s plan to delist shares amid the fraud investigation. “Is this what Elektra is worth? No, it is worth much more and its financial statements prove it,” he posted.
The company didn’t immediately respond to a request for comment on Friday.
Ahead of the stock’s plunge, the company suggested it could sue regulators and the exchange if they allowed trading to resume. As the stock sank Monday, they broadened that implied threat to anyone trading in the shares.
Salinas has a long history of successful, aggressive litigation. He famously won a battle with the stock exchange in 2012 when it moved to take Elektra out of the country’s benchmark stock index.
The main reason the stock price has plummeted is that the company was removed from the S&P/BMV IPC stock index in August due to the prolonged trading halt. That means index-tracking funds were forced to sell.
Fraud Case
The situation is further complicated by fraud allegations that first triggered the halt. Salinas claims in UK court filings that he was defrauded by a fund that claimed to be linked to the Astor family of New York’s Gilded Age.
While he got a $110 million loan from the fund, his lawyers allege most of the 7.2 million shares that were handed over as collateral were sold to fund the very same loans to him, with the rest of the proceeds pocketed by the creditor, who had denied any wrongdoing and says Salinas defaulted on his debt.
After their initial plunge, shares have whipsawed as investors remain wary they will see a decent offer for Salinas to take the company private. Elektra called a shareholder meeting to vote on the proposal for Dec. 27. Salinas owns some 75% of the shares, according to data compiled by Bloomberg.
The stock has sunk to below the current book value of 419 pesos apiece. Mexican law require share tenders to offer investors at least book value for their shares.
(Updates with closing price in paragraph five.)
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