The market for initial public offerings in Brazil is on track for its biggest year since 2007, fuelled by a recovery in asset prices and a surging number of everyday investors buying into stocks.
Seventeen groups have already debuted in Brazil this year and almost 40 more are in the pipeline as companies — and the banks marketing them — work flat out in a year truncated by the coronavirus crisis.
“I heard one asset manager saying he is taking 12 meetings a day,” said Alvaro Gonçalves, chief executive of the private equity group Stratus. Bankers and the buyside are playing “a catch-up game” due to time lost during the pandemic, he added.
Brazilian companies have raised $3.6bn so far this year, a 151 per cent increase from the same period last year, according to data from Refinitiv. Overall, IPOs are up 22 per cent globally.
Rogério Santana, head of client relationships at São Paulo’s B3 stock exchange, cited a significant recovery in stock prices in recent months. The benchmark Bovespa share index is up by almost half since its March low. Higher stock prices, combined with Brazilians diverting capital into the stock market, “brings good prospects for the flow of public offers in the short term”, he added.
The number of retail investors on the stock exchange has almost doubled to 3m this year, from 1.6m last year, according to B3.
Companies have also “been bullish on the recovery post-Covid and are looking to raise funds to finance growth opportunities”, said Matias Santa Cruz, managing director for Latin American equity capital markets at Bank of America. The listings this year have spanned sectors from education to financials and real estate to ecommerce.
For Gabriela Mosmann, an analyst with Suno Research, an important factor behind the boom is the growing confidence in Brazil’s economic stability following a tumultuous decade dominated by a brutal recession and a presidential impeachment.
“Only in the last one or two years have we had a change in the economic situation,” said Ms Mosmann. “We have greater stability. Last year there were IPOs and many were scheduled for earlier this year. But then there was the coronavirus.”
In a departure from recent years, the majority of debuts this year have been handled by local banks, which have rushed to bulk up their staffing.
According to Refinitiv data, four of the five banks leading managers’ rankings in terms of deal volume are domestic: Itaú Unibanco, BTG Pactual, Banco Bradesco and XP. The fifth is Bank of America.
“Because the situation is primarily driven by internal dynamics — local capital moving into equities — international banks are not playing a very leading role,” said Mr Gonçalves. “But other banks are making their move, hiring people and launching new teams.”
Others warn against over-exuberance, pointing to Brazil’s history of high inflation and political crises and the need for structural reforms, such as a tax overhaul, to improve the corporate environment. Some companies have expressed concern over bubbling expectations and volatility in the market.
“You can’t forget that Brazil is Brazil,” said Ms Mosmann.
Additional reporting by Carolina Pulice