MEXICO CITY, Oct 31 (Reuters) - Shares in Mexican retailer Elektra, controlled by billionaire Ricardo Salinas, climbed to a more than one-year high on Friday as investors bet the end of a legal dispute with the Mexican exchange will drive big gains.
Elektra shares rose 13 percent to 504 pesos. Its shares are up about 23 percent since it said late Monday that it had settled a legal dispute with the Mexican stock exchange.
The deal with the bourse prevents any change to the weighting of the company in Mexico’s benchmark IPC stock index until August 2016. Elektra shares account for about 1.4 pct of the IPC, according to Reuters data.
Elektra’s stock slumped about 70 percent in 2012 following proposed changes to the IPC in April of that year. Its share price had failed to recover until this week’s surge.
“Everyone is betting that it will return to the prices where it was before,” said Gerardo Roman, head of stock trading at brokerage Actinver in Mexico City.
In its suit, Elektra alleged that comments from Luis Tellez, the president of the Mexican Stock Exchange, sparked share price losses. Tellez said last week that he will step down next year for personal reasons.
A Reuters report in early 2012 showed that a surge in Elektra’s stock price in 2011 was due to its importance in the IPC index combined with the company’s use of a derivative instrument known as an equity swap that allowed Elektra to make money off its share-price gains.
Its use of equity swaps tied up shares supposedly available on the open market, creating a relative scarcity of its stock that translated into big price gains as funds purchased assets that track the composition of the IPC index.
“They are going to keep playing, doing whatever they like and no one is going to intervene,” Roman said. (Reporting by Michael O‘Boyle Editing by W Simon)