U.S. District Judge Loretta Preska has ruled today against the Argentine state in a lawsuit over the expropriation of YPF. At the same time, YPF has not been held liable for not enforcing the tender offer to minority shareholders mandated in the bylaws, a favorable ruling for the oil & gas company.

In 2012, through its Congress, Argentina expropriated YPF shares held by the Spanish multinational Repsol, at the time the majority shareholder. 

According to the ruling, the lawsuit began in 2015 and was filed by two companies, “Petersen Energia Inversora” and “Petersen Energía.” Between 2008 and 2011, they bought shares of YPF listed on Wall Street (called ADRs) until they held 25% of it. 

The lawsuit was presented against the country of Argentina for not making a tender offer when Repsol’s shares were expropriated, thus not giving the two companies the possibility of an exit from YPF. They also suing YPF for failing to enforce the obligation to make a tender offer, which according to the plaintiffs, was explicitly stated in its bylaws.

Later, in November 2016, Eton Park Capital Management filed its own lawsuit along the same lines that Petersen did. Eton Park and Petersen held about 29% of YPF shares between them.

Despite having initiated the lawsuit, Petersen sold the trial rights to Burford Capital Limited, which now maintains the current litigation against the country. Eton Park sold Burford 75% of their trial rights as well. 

Tender offers are legal clauses that obligate an investor to make the same offer (for price and term of purchase) to all shareholders. These types of public takeover bids usually protect minority shareholders, allowing them them to receive the same sale conditions if the majority shareholders decide to step up.

The court rejected the argument from Argentina’s defense that the current claimants should not be admitted because they are not current holders of the shares. 

“The Court rejects the Republic’s argument that Plaintiffs lack standing because they are not currently security holders. The Republic’s argument misapprehends Plaintiffs’ claims”, wrote Judge Loretta Preska in the sentence. She used Argentine law to analyze the case. 

According to Sebastián Maril, director of Latam Advisors and one of the Argentine experts who follows the case in detail, the court ruling sends  a message to all governments that want to expropriate companies that are listed on the US stock exchange. 

“They can do it, but they have to pay all the shareholders who want to exit the company if they do it,” Marill told the Herald. 

The amount of compensation has not yet been defined.

What’s next

Looking ahead, says Maril, the first thing to be expected is a statement from Burford announcing the steps to be taken following Preska’s decision. According to the Argentine analyst, they could request the seizure of Argentine assets, although he warns that Argentina no longer has assets to seize.

An appeal by Argentina to Preska’s decision can also be expected. The Herald has contacted Argentine officials in charge of the legal strategy but they have declined to comment on the matter.