: valuation of an expropriated company - Case Study Example

Smith (2001) defines expropriation as the act of a foreign state taking the property rights of an individual in the exercise of its sovereignty. The sharp price fall after January 23, 2012 can be deduced from the events that took place during the period. It was around this time that rumors hit the press for the first time that the government was considering expropriating the company. Being a private company, it was said that the government was preparing to initiate a take over of the company. Amid the various rationale fronted to back the rumored move, confidence among investors was draining which led to a sharp decline in demand for the shares.

This precipitated the decline in price that was later observed. The region of Vaca Muerta is one of the richest reserves operated by YPF. The region has immense wealth and following the province after province mining rights withdrawal for the company, it was obvious that this region would be among the most devastating blows to its stability endeavors since it carried much hope especially in recouping the exploration expenses. However, despite the massiveness of the deposits, it has become difficult for YTF to convince international companies into agreements to invest in Vaca Muerta.

Looking at the plot of its shares performance in the stock market, it shows a continued low phase to as far as October 2012. This indicates an inability to mobilize enough funds for the financial markets. The court has the legal obligation to ensure that the expropriated rights are passed to functional hands, and the most obvious and available appropriator could be the Argentine government. However, once the government acquires these rights through a court directive, it could pass the bill over to its citizenry through an IPO.

That would serve to boost the performance of YPF’s share performance in the stock market as well as raise much needed