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. Last Updated: 07/27/2016

The Surgut Stock Price Bubble Pops

Surgutneftegaz nose-dived nearly 15 percent Tuesday to 45 cents following an announcement by management that it would alter its shareholder structure to protect a crucial 42 percent stake from attack by corporate raiders.

Surgut has climbed more than 70 percent over the past month on the back of a massive surge of buying that analysts say has been driven by cash-rich rival oil barons moving in to prepare for a potential attack on management's ownership control of the company, and defensive buying by management as a result.

A Surgut spokeswoman confirmed on Tuesday reports that the company had called an extraordinary general meeting for June 6 to change the subsidiary that holds 42 percent of the company in treasury shares from a joint stock company to a limited liability company -- a move analysts slammed for making the company's structure even more murky than it already is.

Surgut management's use of those treasury shares to wield voting control over the company -- a policy that could be challenged in court -- has been key for management maintaining ownership control. Before the recent rally, management was seen to directly own just 19 percent of the company's stock. Thirty percent is freely traded.

By turning the subsidiary, NK Surgutneftegaz, into a limited liability company, management would not be required to disclose whether it had sold the shares to a third party -- making it harder to track them down in the event of a legal attack.