Case Study 1 Memo- Gazprom and Itera
In the case study of Gazprom and Itera, we see how different companies and governmental organizations can potentially be able to exploit a large company such as Gazprom for a large profit. Gazprom is a large gas and oil company that is valued very cheaply compared to other large oil and gas companies (such as Exxon Mobil). Browder is a shareholder of Gazprom that identifies several questionable transactions that were done by Gazprom and other organizations that have relationships with Gazprom. He is questioning why the undervaluation could have occurred based on the business being conducted by the oil giant.
The problem that exists for Gazprom is that the market perceives the company to have lost 99 percent of its assets, completely devaluing the price of its goods. In reality, only 10 percent of its assets were stolen, and the market is slowly trying to catch up to that truth. Browder is attempting to identify the transactions in order to solve the large problem at hand. These transactions include organizations that work with Gazprom such as Itera (a gas trading company) and PricewaterhouseCoopers (their internal auditor) devaluing the gas and oil Gazprom held in certain situations and reselling it for a profit. In one example, Itera bought gas valued at $35 a barrel from Turkmen gas and resold it to Gazprom for $45 a barrel. PwC thought this difference was acceptable due to transportation costs, even though those were already taken care of separately. In general, the lack of transparency and accountability being administered by management in Gazprom and its partner companies was a failure to its stockholders.
Browder’s recommendations to the Russian government are vital, mainly due to the fact that it has a 38% controlling stake in Gazprom. Because the vast majority of the operations conducted by Gazprom occur within Russia’s boundaries, it is up to the government to set the correct standards...
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