Imagine being one of the wealthiest people in the world (No. 8, with $30b, according to Forbes magazine) and in the space of one year, losing about 99% of that wealth.
One way to do that: destroy tens of billions in shareholder value, lead your primary investment vehicles into bankruptcy and set up your entire inter-locking set of companies as little more than a house of cards.
Brazilian business impresario Eike Batista made his fortune in gold mines out of Brazil and Canada. Not your conventional business leader, Batista boasted that he “wanted to be the richest man on Earth”. He married a Playboy model, parked his million-dollar car in his living room and was constantly in the spotlight in Brazil. While out-size egos are not an unknown phenomenon among business tycoons, building profitable businesses is the only currency that really counts in this game. That didn’t work out so well.
In 2007, he identified what he called a huge opportunity in offshore oil and convinced investors that there were 10b barrels of recoverable oil just off the coast of Sao Paulo, equivalent to 11 years of current Brazilian production. OGX, the company created to exploit the oil, went public with a $4b market cap.
Batista exaggerated the size of offshore fields and underestimated the difficulty and cost of extracting oil deposits that rest under salt, sand, and rock. Announcements of massive oil finds, often around the time Batista was raising funds, were followed by months of silence, until the company subsequently announced slashed production estimates.
Several other companies — all with an “X” in their names to signify that they were wealth multipliers — were created around OGX to exploit related opportunities, such as the oil platform builder OSX that no longer had a customer once OGX folded. Both OGX and OSX have debts greater than assets today, with stock prices that have dropped 95% on the year.
While Batista formally held the chairman position in his companies and not the official CEO title, he was the driving force. But as is often the case when failure becomes so public, he has been busy shifting blame to the various CEOs and turnaround experts he’s brought in over time.
In the end, Eike Batista was more a master salesman — he cut his teeth knocking on doors selling insurance — than a master leader. He just didn’t have the ability to lead and manage a complex business.