(Bloomberg) -- PT Barito Renewables Energy tumbled by its daily limit after FTSE Russell said it would delete the Indonesian power giant from its indexes a day after the anticipated entry date.
The decision comes after the index compiler cited “high shareholder concentration” for the $78 billion geothermal power company, adding that four shareholders control 97% of total equity issued. Shares sank by 20%.
The saga is the latest twist for Indonesia’s biggest company by market value, whose shares went on a wild ride earlier this year following its addition to a stock exchange watchlist for volatile and troubled companies. The swings — the most extreme among companies worldwide valued at $50 billion or more — spurred FTSE Russell to earlier delay the company’s inclusion into its large cap index.
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Barito’s exclusion from the indexes “reflects the inherent risks of limited liquidity,” said Mohit Mirpuri, a fund manager at Singapore-based SGMC Capital Pte. “The stock remains highly volatile, and to unlock more potential and stabilize its share price, Barito should seriously consider increasing its free float.”
A company spokesperson did not provide any immediate comment.
Indonesia is no stranger to a whiplash in regulatory or corporate actions. The geothermal power producer was slated to be added to the FTSE Global All Cap Index series and associated gauges when trading starts on Monday. The stock will be deleted starting Tuesday, according to a FTSE statement.
Investors have long worried that scant analyst coverage and elevated valuations across stocks limit their ability to put more funds into Southeast Asia’s biggest market. The events also highlight the precarious nature of investing in emerging markets prone to unexplained sizzling gains and sudden slumps.
Shares of Barito surged more than 1,400% to a record high reached earlier this month since its October 2023 public market listing, albeit with sharp declines in between. Barito Renewables only has one company analyst rating, according to Bloomberg-compiled data.
The surprise removal of Barito “may be significant enough to interrupt the celebratory sentiment” on Indonesia’s stock benchmark, according to Jeffrosenberg Chenlim, an analyst at Maybank Investment Bank Bhd. Still, investors are hoping for a recovery should the stock be included into any MSCI Inc.’s indexes during a review later this year.
The firm is majority-owned by PT Barito Pacific, which is majority-owned by billionaire Prajogo Pangestu. Barito Pacific shares fell 11%.
Indonesia’s stock benchmark closed 2.1% lower, with both companies among the biggest drags.
--With assistance from Eddie Spence.
(Adds investor comment in fourth paragraph.)
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