Pandemic no bar as Brazil catches IPO fever
From builders to retailers, number of companies to hold offerings over next two weeks hits 2007 high
Sao Paulo — One of the world’s worst hot spots for the coronavirus is also experiencing the fastest pace of initial public offerings (IPOs) in more than a decade.
From builders to retailers, five Brazilian companies are due to hold IPOs over the next two weeks, the highest number for any fortnight since 2007, according to data compiled by Bloomberg. An education company, which is going public in the US but has yet to announce a pricing date, could boost the tally to six.
The phenomenon underscores the dissonance that has caused equity markets to soar globally amid a global health catastrophe. Money managers in Brazil said they’ve been flooded by pitches from bankers in recent weeks as companies that put off sales at the beginning of the pandemic look to take advantage of resurgent demand.
“Companies are worried that this window may be relatively short due to the disconnect between market levels and the state of the real economy,” said Pablo Riveroll, head of Latin American equities at Schroders in London. While Brazilian stocks have bounced back 64% from their March lows, the local economy is expected to shrink almost 6% this year.
Globally, the IPO picture is mixed. Sales reached $83.1bn in the past three months, up from $68.5bn during the matching period last year, with China’s red-hot market accounting for almost half the total. The number of deals, however, fell to 370 from 423.
While Brazil’s market is experiencing a surge in volume, the amount being raised is modest. The five companies are targeting just 7.9-billion reais — the same amount retailer Lojas Americanas received in a follow-on offering two weeks ago.
A proliferation of smaller asset-management funds and strong demand from retail investors is driving the sales. Foreigners have bought only about 36% of local share sales in the first half of the year, down from 47% during the same period last year, according to stock exchange data.
“With more [assets under management] in local equity funds, corporates are taking advantage of the opportunity to tap the markets and refinance debt, invest in future growth, or both,” said Malcolm Dorson, who helps manage about $950-m of emerging-market funds at Mirae Asset Global Investments in New York.
Among companies vying to go public are an Advent-backed home improvement retail chain, which the private equity firm has held on to for more than a decade, a money-losing high-end clothing retailer and a spin-off of a pharmaceuticals company that is down 70% since it debuted in 2006.
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