Cheers or brickbats for the Petrobras (PBR) share offering last Friday, September 24, in Sao Paulo?

 The Brazilian government is leading the cheers. President Luiz Inacio Lula da Silva gushed on September 24 that Petrobras had successfully concluded the biggest sale of shares ever. “It wasn’t in Frankfurt. It wasn’t in London. It wasn’t in New York. It was here in Sao Paulo.”

 Petrobras raised $67 billion in the sale. No doubt about it–that is a lot of cash.

And the brickbats? Some spoil sports are pointing out that the sale wasn’t quite as big as advertised before the fact.

Demand from private shareholders who already owned shares of Petrobras and who were therefore entitled to buy more shares in the rights offering was less than expected. And it looks like the government wound up buying 65% of all the shares sold.

The offering was oversubscribed (in other words, buyers put in bids for more shares than were on offer) by about 30%. No mean feat when you’re trying to sell such a big offering. But not anywhere near the 100% oversubscription rate that was the talk of the markets before the offering.

In fact, it looks like Petrobras and its team of investment bankers decided to cut the size of the offering from a potential $77.2 billion (once all extra shares were sold) to $67 billion in an effort to make sure that the underwriting syndicate would not have to lower the price of shares to get them all sold.

I’d toss a slightly different brickbat. One big fear before the offering was that demand from existing and new private shareholders wouldn’t be strong enough to absorb all the shares available to this group of buyers and the government would wind up adding even more shares to its sizeable minority position. That would increase the government’s control over what was a state-controlled company until 2000 when the government sold off 25% of its shares. In the last decade the government’s stake had fallen to approximately 40% as a result of other sales of shares to raise capital for the company.

Some existing shareholders called this offering a “reverse privatization” that would give the government more control over the oil reserves recently discovered in deep water off Brazil’s coast. The way that this offering finally worked out isn’t going to make those fears go away. A preliminary count shows the government’s stake in Petrobras climbing to 48% from 40%.

The implications of that extend far beyond Petrobras. Some investors see an effort by Brazil to move toward asserting government control over the country’s biggest exporters such as Petrobras and Vale (VALE). Some of that comes down to pre-election jitters. Lula can’t run for a third term and the country will have a new president when all the votes are counted from the October 3 election. Investors never like that kind of uncertainty. But some of it seems to be a logical conclusion from the government efforts to push Petrobras into investing in lower margin refining activities and to put pressure on Vale to invest in strategic (according to the government, anyway) domestic industries.