The number of edges that have been incorporated into the movements of the financial markets has complicated the interpretation of the events that impact the stock markets and listed companies in recent times.

Algorithms, investment trends, passive management, ESG criteria (environmental, social and corporate governance, which in English are known by the acronym ESG), portfolio rebalancing, expiration of futures or meetings of large central banks are some of the elements that drive investment in the 21st century and have great significance for listed companies, which depend on capital markets to finance their development.

In this complex context, the ‘Villarejo case’ is an element that distorts the panorama adding another point of complexity to the evolution of the Ibex 35 companies affected by the former commissioner’s business.

The most recent case is that of Iberdrola. Norges Bank’s movements with its trading The daily newspaper has caused the weight of the bank that manages the Norwegian pension fund in Iberdrola to drop from 3% on several occasions in recent months, and then to return to that threshold.

Without going any further, after some share purchase and sale operations that have marked this oscillation in the first semester, Norges once again exceeded 3% in the capital of the electricity company last week, as notified to the CNMV.

This movement shows that the imputation of Ignacio Sánchez Galán and his number two, Francisco Martínez Córcoles, in one of the pieces of the ‘Tandem case’ has not motivated a stampede of international funds despite the fact that many headlines in the press have linked these movements to stock market falls in the electricity company.

This is an element to take into account before the postponement of Galán’s statement decided by the judge, after a harsh letter from the electricity company and the possible imputation of the company, as already happened with BBVA without investors penalizing him with movements resounding.

Affected companies

The ‘Cenyt case’ already directly or indirectly affects four large Spanish listed companies (Iberdrola, BBVA, CaixaBank and Repsol). As this newspaper reported, its possible impact on the price of these companies worries their managers and even the Executive.

However, for the moment that effect on the markets has been more than limited. Do not forget how BBVA closed as the best Spanish bank on the stock market in 2019, when his dealings with Villarejo were day after day in the national press.

With this precedent, is it possible to link Iberdrola’s fall on the stock market since January to the evolution of the judge’s investigation? The analysts consulted consider that the drop in their titles that has occurred since the highs that played in January is due to other factors with greater weight.

Yes, in the case of the fall in securities that occurred on the day of the announcement of the imputation, they recognize that in a party can be linked to the news by the immediate response of the hedge funds. But the evolution of the electricity company from that day until the close of this Friday has been less negative than that of other rivals, such as Endesa, which gives an idea that the ‘Villarejo case’ is not what is setting the pattern of its behavior .

Moment of the sector

“The energy sector has experienced its momentum in the last two or three years to the heat of the ESG criteria that have determined the revaluation of many values ​​associated with renewable energies. But this push is losing its impact because the main portfolios are already positioned and they are beginning to pay attention to other values, “a market source explains to this newspaper in relation to this question.

In this context, a report published this week by RBC points to the sector of the utilities as the worst behavior has had it on the stock market this year.

European public service companies have lagged behind, “explains that report, which also points out that the possibility that a weak economic recovery may negatively affect renewable energies.

Government regulation

If at the global level this has happened, at the local level there is another element that has played very against the price of electricity: the regulatory uncertainty which stems from announcements such as, for example, the end of the so-called ‘profits out of the blue’ of these companies.

This has meant that, since it was announced on May 28 at the close of the market, companies such as Iberdrola have fallen by more than 7% and Endesa by more than 11%. Naturgy has had less impact, with an increase in this period.

It is this regulatory uncertainty that analysts highlight as triggers for the fall in the company’s share, compared to other interpretations that have pointed exclusively to the ‘Cenyt case’.

The large investment banks have provided – at least for the moment – a very limited attention to this matter, which affects one of the most active multinationals in the market not only because of its stock market volume, but also because of its debt issues or its numerous deals (corporate movements).

The analysis houses that have covered this issue have not highlighted it with big headlines in their reports and those that have referred to the thorny issue have framed it within the dynamics of an incipient judicial investigation.

“The investigation does not amount to a formal accusation that a crime has been committed and, even in a negative outcome scenario, we see limited risk to the company’s strategy as the bulk of the 75 billion euros of investment included in the 2020-25 strategic plan that has already been compromised “, affirms a report of Alantra consulted by this newspaper.

This signature adds that the eventual resignation of its president “would be negative news for the company” in the current context in which the action is limited to an investigation.

ESG criteria

However, if among the hands that move the markets the book to follow is that of the ESG criteria, the fact that the company is immersed in a judicial investigation makes it This point also needs to be addressed, but putting it in context.

The large institutional funds have maintained their support for Galán in recent months without moving the shareholding. Qatar Investment Authority (8.69%) and BlackRock (5.23%) maintain their positions, while Norges Bank has once again exceeded that 3% with fluctuations.

This is because the application of these criteria is subject to very complex qualifications -some under review- which mean that, without a formal accusation, Iberdrola continues to be one of the companies that best adheres to its requirements.

Last May, the Fitch agency placed Iberdrola on the podium of the companies best positioned for the transition to a zero carbon economy along with Orsted and China Three Gorges.

Agencies rating They are becoming the great rating agencies for green investments and reports like this weigh on the investment decision of funds that operate with ESG criteria.

Iberdrola is the largest private issuer of green bonds in the world and this makes the company one of the favorites of the ‘green’ funds with 32,000 million euros of sustainable financing in 2021.

It is something that continues to weigh on the ASG portfolios, which without formal accusation does not seem that they will pay much more attention to the ‘Cenyt case’. But this does not mean that the value cannot fall in the coming months.

To the complexity of interpreting the markets, another element is added, and that is the concern of investors for macroeconomic issues by the inflation scenario that is drawn in the United States and also in Europe, as well as the effect it can have on the evolution of interest rates.

Economic recovery can be a double-edged sword for these companies. On the one hand, it allows accelerate your green investments, but on the other, the utilities They are defensive stocks and do not always move favorably when GDP grows.

It is all these ingredients, seasoned with passive management and the behavior of algorithms, which mark the evolution of large listed companies, including those affected by Villarejo, a case that, as the companies themselves have recognized, is damaging their reputation .


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