Although 2019 had been a busy year for the global stock market, since it hosted some of the highest initial public offerings ever – such as the ones of Alibaba ($11,2 bi), Uber ($ 8,1 bi), and Saudi Aramco ($ 25,6 bi) – when it comes to numbers, the total amount of IPO’s during the last year, actually, dropped.
From 1,500 initial public offerings in 2018, against 1,243 in 2019, the reduction has to do with the rising geopolitical tensions that took place last year, something that affected investors’ trust.
But while on a global scale, financial exits of this kind had a worse performance in 2019, in Brazil, the story was different: the country saw a 66% rise in IPO’s, even if in real numbers this represents a shy improvement from 3 offerings in 2018 to 5 in the last year. Information is from a study held by Baker McKenzie in partnership with Trench Rossi Watanabe and reported by Brazilian media outlet Valor.
In figures, Brazil has also outperformed the global average. While the amount generated by the public offerings has decreased by 8% YoY, to $ 231.7 bi; in the country, the volume generated grew by 51.7% – from BRL 6.751 bi in 2018 to BRL 10.243 bi in the last year. Latin America’s total of operations has also decreased by 33% in 2019.
The US-China trade war, the postponing of Brexit, Hong Kong protests, political tensions in Latin America, and the underperforming IPOs of companies like Uber, Lyft and WeWork‘s IPO withdrawal last year played a pivotal role in such results, making investors more reluctant with the global stock market.
Brazil, however, took the opposite direction. According to Daniel Facó, from the consultancy responsible for the study, Trench Rossi Watanabe, although initial public offerings are not as attractive as the shares of consolidated companies, there has been a recent growth in Brazil’s as well as in Brazilian companies’ credibility. This optimistic scenario in the country led to a drop in interest rates – something that boosts stock markets.
“There was a lot of foreign investment related to interest earnings. After all, they entered with hard currency and received yields on government bonds that are not paid anywhere else in the world. But now, with the lowest ‘spread’, the natural path turns into the stock market, and IPOs are more attractive,” said Facó to Valor.
In Brazil, latest IPOs such as the ones of construction company Mitre, first public offering of the year in the country, and of website hosting company Locaweb, performed with their shared very well valued in the Brazilian stock market B3, highlighting the good momentum of these operations in the country.
“I believe we will have a greater volume of offerings in 2020, as 2019 was still for consolidation and discussion of constitutional amendments. Now I see a window of opportunity,” he added. For the expert, this is a good timing for offering shares in sectors other than those already consolidated on the Brazilian stock exchange; such as infrastructure and insurance.