Investing.com -- After a cumulative increase of 42.24% in March and April, JBS SA (OTC: JBSAY ) shares (BVMF: JBSS3 ) are down 9.55% in May. Of the 12 trading sessions of the month, the meat processing company’s shares fell in nine of them. Today’s session is one of the three that are positive in the month, with an increase of 3.08%, as of this writing.
In a note to clients on Monday, JPMorgan attributes the drop in the previous 3 trading sessions to the report by Institutional Shareholders Services (ISS) , a corporate governance consulting firm, which points out governance risks with the dual listing of JBS shares on the Brazilian and American stock exchanges. The firm is concerned about the decision format that largely favors controlling shareholders, which could potentially harm the rights of minority shareholders.
As the decision on the dual listing, which will take place next Friday (May 23) at an Extraordinary General Meeting, will be up to minority shareholders, JPMorgan analysts recommend protection in case the proposal is rejected. The strategy recommended by the American bank is to buy put options for May 30, either directly or financed by the sale of call options.
JBS’s majority shareholders, J&F Investments and BNDESPar, said they will abstain from voting during the meeting. The two shareholders hold almost 70% of the company’s share capital, while minority shareholders hold just over 30%.
The expectation of the vote on the dual listing on B3 and the New York Stock Exchange has been driving the price of JBS shares since the Securities Exchange Commission (SEC, the US CVM) approved the dual listing on March 22, which led to the strong accumulated rise in the meat processing company’s shares in March and April.
The transaction also depends on approval from the Brazilian Securities and Exchange Commission (CVM). The expectation is that the company’s shares will begin trading on the NYSE on June 12 if the dual listing is approved.
JBS’s response to ISS
JBS criticized ISS’s position on the dual listing in a letter to its shareholders . "ISS clearly fails to recognize the long-term commitment and strategic importance of the controlling shareholder’s role and contribution to achieving JBS’s leadership in the global food industry," the company wrote.
Goldman Sachs wrote two weeks ago, regarding the dual-listing structure, that JBS competitor Tyson Foods (NYSE: TSN ) (NYSE: TSN ) also offers different share classes and said rivals such as Marfrig (BVMF: MRFG3 ), BRF (BVMF: BRFS3 ) and Minerva (BVMF: BEEF3 ) "have a clear controlling shareholder."
JBS shares fall in May
In addition to a healthy correction and the effects of the ISS letter, the company’s management’s acknowledgement that 2025 would be "more challenging" than 2024 ended up affecting the stock’s performance in May. In a conference call for the first quarter of 2025, executives cited the tight cattle cycle in the US and the uncertainty related to the global tariff war, which would harm US meat exports to China.
JBS reported a net profit in line with expectations of R$2.9 billion in the first quarter, a 77.6% jump compared to the same period last year, due to favorable results in the poultry and pork units in Brazil and the United States. EBITDA increased 38.9% to R$8.9 billion, with a margin of 7.8%. The net result was in line with analysts’ forecast, according to a survey by LSEG, which also projected R$8.77 billion for adjusted EBITDA.
JPMorgan remains Overweight on JBS shares
Despite concerns about the vote at the Extraordinary Meeting regarding the dual listing, JPMorgan analysts remain optimistic about JBS shares, reiterating that they are “Overweight” on the meatpacker’s shares.
JPMorgan cited the following arguments for its position on JBS:
- Strong earnings momentum, with potential for valuation above market consensus.
- The reassessment of the company’s fundamentals with the dual listing, with the share being traded in a market with a higher trading volume.
- JBS shares are cheaper to invest in than their American peers.
The American bank maintained its target price at R$52 per share, a potential upside of 30%. JBS shares are trading at 4.7x EV/EBITDA under the firm’s 2025 projections. However, the update to its model reduced the EBITDA projection in 2025 by 2%, to R$38.4 billion, still 4% above consensus, with an estimated free cash flow of R$9.8 billion.