The market for initial public offerings at Brazil is on track for its biggest year since 2007, driven by a recovery in asset prices and a surge in the number of daily investors buying shares.
Seventeen groups have debuted in Brazil this year and nearly 40 others are in the works as companies – and the banks that market them – teamed up in a year cut by the corona virus crisis.
“I heard an asset manager say he has 12 meetings a day,” said Alvaro Gonçalves, chief executive of private equity group Stratus. Bankers and buyers are playing the “catch-up game” because of the time lost during the pandemic, he added.
Brazilian companies have raised $ 3.6 billion so far this year, a 151 percent increase from the same period last year, according to data from Refinitiv. Overall, IPOs were up 22 percent globally.
Rogério Santana, head of client relations at the B3 São Paulo stock exchange, cites a significant recovery in share prices in recent months. The benchmark Bovespa stock index has nearly halved since its March low. The higher share prices, combined with Brazilians shifting their capital to the stock market, “carry good prospects for a stream of public offerings in the short term”, he added.
The number of retail investors on the stock market has nearly doubled to 3 million this year, from 1.6 million last year, according to B3.
Companies are also “bullish on the post-Covid recovery and looking to raise funds to finance growth opportunities,” said Matias Santa Cruz, managing director of Latin American equity capital markets at Bank of America. This year’s recordkeeping has spanned various sectors from education to finance and real estate to e-commerce.
For Gabriela Mosmann, an analyst at Suno Research, a critical factor behind the explosion was the growing confidence in Brazil’s economic stability after a turbulent decade dominated by brutal recession and presidential impeachment.
“Only in the last year or two have we experienced a change in the economic situation,” said Mosmann. “We have better stability. Last year there were IPOs and many are scheduled for early this year. But then there’s the coronavirus. “
Notwithstanding recent years, most of the debuts this year were handled by local banks, which were hastily increasing their staff numbers.
According to Refinitiv data, four of the top five bank managers’ rankings in terms of deal volume are domestic: Itaú Unibanco, BTG Pactual, Banco Bradesco and XP. The fifth is Bank of America.
“Since the situation is mainly driven by internal dynamics – local capital is moving to equities – international banks are not playing a very important role,” Gonçalves said. “But other banks are starting to move, hiring people and launching new teams.”
Others warned against overdoing it, pointing to Brazil’s history of high inflation and the political crisis and the need for structural reforms, such as tax improvements, to improve the corporate environment. Several companies have expressed concern over the swelling expectations and volatility in the market.
“You can’t forget that Brazil is Brazil,” said Mosmann.
Additional reporting by Carolina Pulice
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