The Initial Public Offerings (IPO) market in Brazil is experiencing a boom, despite the Covid-19 health crisis and amid signs of a gradual economic recovery.
There are currently 33 companies that expect to debut on the Sao Paulo Stock Exchange in the remainder of this year, which will be added to the 26 companies that have been made public so far this 2021, according to data from specialists from the local site EuQueroInvestir, focused on financial analysis and education.
If these exits materialize, the Brazilian capital market would be closing in 2021 with the arrival of at least 59 new issuers, thus setting a new record, after the “good harvest” registered in 2020, when 28 Public Offerings were carried out. Initials.
“Despite the timid start, the share offering positively surprised the market in February as 13 companies went public that month. In March, no new IPOs were carried out and May was again marked by applications from companies controlled by large corporations, such as CSN Cimentos, Companhia Brasileira de Alumínio and Raízen, a firm in the agricultural sector, which could be one of the largest IPOs in the country. history ”, explained the specialists of EuQueroInvestir.
Among the companies that have been listed this year on the Bovespa, the only Stock Exchange in the South American country Brazil, are PetroReconcavo, an independent oil and gas exploration and production operator; ModalMais, the platform with banking products and services and Good Crop Seeds, a company in the agricultural sector dedicated to planting grains such as soybeans, corn and beans.
Good moment
The debut of companies on the Brazilian Stock Exchange also occurs at a time of economic recovery, since the country is expected to close with a growth of 3.7% in 2021, according to estimates by the Organization for Economic Cooperation and Development (OECD).
The Gross Domestic Product (GDP) for the first quarter of 2021 of the largest economy in Latin America, rose 1.2% compared to the fourth quarter, according to the National Statistics Agency of Brazil, while an increase of just 0.7 percent was expected. hundred. This situation has brought optimism to the country’s businessmen, who see the recovery of the country’s economy closer.
According to the government agency, the increase in GDP was led by a 5.7% growth in the agricultural sector. It also included a 4.6% increase in investments.
Brazil’s economy has returned to pre-pandemic activity levels after a 4.1% recession last year that was less than that of its neighbors, some of which contracted twice.
On June 2, after the Brazilian GDP data was released, the Sao Paulo Stock Exchange registered a new closing record, for the first time above 128,000 points.
The credit risk rating agency Moody’s foresees good liquidity conditions for companies in Brazil, Mexico and Peru between 2021 and 2022, in contrast to Argentine companies, for which it projects worse forecasts due to its “weak conditions in the local market “.
The firm estimates that liquidity conditions for Latin American companies will vary throughout 2021 and 2022 as the global economy recovers from the pandemic crisis and high demand for raw materials boosts exporters’ cash balances.
Brazil’s corporate EBITDA will grow in 2021 and 2022 as exporters benefit from rising commodity prices, weak currencies and sustained demand, while sectors focused on domestic sectors they will see a recovery in sales.
Largest market
Alan Gandelman, CEO of the Planner brokerage, said that “the upcoming share offerings on the Brazilian Stock Exchange” can be explained by optimism about the advance of vaccination against Covid and upward revisions of the growth of the Brazilian economy, then that first quarter GDP beat expectations.
The specialist, quoted on the Brazilian site, pseudinheiro.com, says that the fall in the dollar and the positive results of companies in the first quarter have been factors that have helped attract investors to the local stock market. “It will be an interesting IPO window because there is a little more appetite,” argued Gandelman.
In Brazil, the companies listed on the Stock Market now number 418, almost three times the companies listed on the BMV.
While Brazil is experiencing a wave of IPOs, only two issuers have reached the Mexican market, but not through an IPO, since the list of these issuers has been the result of the separation of businesses and the substitution of shares.
One is Alterna Asesoría Internacional, a personalized financial services company, which listed its shares on the BMV on June 1, following the spin-off of Corporación Actinver, which is already listed on the stock market.
Another is Sempra Energy, a US energy firm, which listed its shares in the BMV after taking control of its subsidiary, Infraestructura Energética Nova (IEnova) after having made a public share exchange offer, with which it raised its stake to 96.4 percent.
There is a company that has submitted its application to launch an IPO in the BMV: Alimentos y Procesados Intercarnes, a subsidiary of Grupo Bafar. However, Bafar is already publicly traded.
Last week the general director of the BMV, José Oriol Bosch, said that the lack of arrival of companies on the Stock Exchange is mainly explained by the lack of promotion and financial and stock market culture.
However, he was optimistic, saying that with the economy looking better and the major stock index hitting all-time highs, there may be better ground for startups to IPO.
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