SAO PAULO – Until the beginning of August 2021, according to data from Bloomberg, the volume of initial public offerings of shares (IPO, in English) of Brazilian companies increased by more than 400% this year until the beginning of August, compared to equal to 2020, with companies raising R$57 billion. The count in 2021 surpasses the previous record, from 2007, of R$ 53.6 billion in 2007, when 60 companies went public.
However, the records of IPOs of Brazilian companies were not only accounted for at B3: the year also has many Brazilian companies making IPOs in the United States. This year, Zenvia, Vtex, Pátria and Vinci went public on Nasdaq, with the expectation that more companies will make their debut on the American Stock Exchange by December.
To talk about the reasons why companies choose to go public in the US or Brazil and the prospects for the market, in addition to the similarities and differences in the market, the 11th edition of Expert XP held a panel this Wednesday (25th) with Bob McCooey, Global Head of Capital Markets at Nasdaq, and Vitor Saraiva, Head of Equity Capital Markets at XP, with the mediation of Jennie Li, equity strategist at XP.
McCooey highlighted that several Brazilian companies are going public in the American market as a very representative movement. However, it is still an incipient number when compared to companies that do IPO locally.
Among the sectors of the Brazilian economy that are going public with Nasdaq in recent years, the Nasdaq executive points out that fintechs and the so-called “edtechs”, or educational technology companies, such as Vitru, Afya and Arco, have also stood out, also leading in account the “DNA” of the Exchange, more focused on technology.
In general terms, the global head of capital markets at the US Stock Exchange points out that he has seen a growth in the number of IPOs on Nasdaq, also highlighting the recent boom in the segment of “health tech” or healthcare technology companies.
McCooey pointed out that he strongly believed that most companies belong to their local market and that “this is true for most markets.” However, he cites that a strategy for companies to decide to go public abroad is to expand their horizons outside their country, such as, for example, a national company that would like to expand its participation in other countries in Latin America. In addition, some companies also choose to go public abroad in order to have more access to capital outside the local market (especially in the US) and to have greater visibility.
If some Brazilian “techs” seek to go public on Nasdaq, Saraiva, from XP, believes that the local market has room for any sector, which is still very concentrated in commodities and financial institutions.
However, he emphasizes that what has been observed is the tendency for companies in the agribusiness sector to go public on the Brazilian stock exchange. Currently, he assesses, the sector is very relevant for the economy, but still very incipient on the Stock Exchange, with few companies. Thus, there is still a long way to go.
“There are very good companies that can and will access the market”, highlights Saraiva, also citing technology and health companies with potential to access the capital market.
This movement of greater development in the capital market converged with the recent context of lower interest rates, which led local investors to look for assets other than fixed income. Although the Selic, the benchmark interest rate, has risen recently, it is below the double-digit levels observed in 2017.
But, in addition to the more favorable macroeconomic scenario and the evolution of the capital market, the Nasdaq executive believes that the demand for IPOs – both in Brazil and abroad – also takes into account the efforts of venture capital entrepreneurs.
“Venture capital investors both local and global have done an incredible job in Brazil. They have been preparing companies both for fundraising rounds and for a future share offering”, he said. For McCooey, the wave of entrepreneurship is just beginning to form: “Sometimes Americans believe that entrepreneurship is our invention. But it’s not, it’s all over the world, we see incredible companies going public in the US coming from Israel, China and Brazil”.
The executive also spoke about the endorsement given by the Securities and Exchange Commission (SEC), the US CVM, for Nasdaq to adopt as a requirement that most listed companies have at least two different members on their boards of directors, one woman and an LGBTQ+ member or another under-represented minority.
McCooey highlighted that the companies will have a deadline for adaptation (valid from the approval by the SEC). The publication of information on board diversity should take place as early as next year, while the other rules must be fulfilled within a period of 2 years for the inclusion of a woman on the Board and a further 2 years for the inclusion of an under-represented minority . “There will be time for companies to find the right people,” he said.
The executive highlights the statistical evidence that the greater the diversification in companies, the better the performance and said he is excited about the approval made by the SEC. “We thought it would be our responsibility to have more inclusion and diversity in this regard. (…) We felt that this is an important area for us and that we should assume a leadership role”, he points out.
It is noteworthy that, if they do not reach the minimum of diversity, companies will have to explain the reasons in public documents. The exchange will verify that the explanations have been made public, but the merits of the justifications will not be evaluated.
In Brazil, the general assessment is that the country is much further behind in this regard. However, Saraiva emphasizes that more local investors are more concerned with the issue and that this issue needs to be brought up.
“We don’t have anything specific, no metrics that oblige companies to do this, but the market is regulating itself, it brings awards for transparency and also for these initiatives”, he highlights.
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