The Brazilian stock market prepares for another IPO in 2021 after an army of new investors pushed ahead with its strongest year for IPOs in more than a decade.
An iron ore miner, a crematorium operator and an online furniture seller are among a list of 41 companies that have announced their intention to debut on the B3 stock exchange in São Paulo, which saw 28 IPOs last year despite the Covid-19 pandemic largest number since 2007 at 64.
“It could turn out to be more active than 2020,” said Roderick Greenlees, global head of investment banking at Itaú BBA. He expects 30 to 40 listings this year as part of a larger onslaught of stock market deals that he believes is “possibly our biggest pipeline ever.”
Total company that went public on B3 Last year, R $ 43.7 billion (USD 8.3 billion) was harvested, more than four times the previous year, according to the data of the exchange. Together with the subsequent share issues, the total amount of equity raised was over R $ 100 billion for the first time in 10 years. According to Refinitiv, IPO revenues rose by around a quarter worldwide.
The bonanza for the stock sale is expected to continue despite the economic disruption Covid-19 caused to Latin America’s largest economy. The country is in a second wave of the virus, but vaccines are finally rolled out after delays.
One factor behind the boom in companies entering the stock market is the historically low interest rates in Brazil, which have driven savers from deposit accounts in stocks and riskier assets in hopes of higher returns.
The number of private investors on the B3 exchange nearly doubled to 3.2 million in 2020, reflecting a broader global trend of everyday people playing in the market.
Rogério Santana, head of customer relations at B3, said this was different from previous capital market cycles in the country and coincided with companies looking to diversify their funding sources. “A greater presence of local investors brings more solidity and consistency,” he added to the Brazilian stock market.
Foreign investors have also rushed to buy Brazilian stocks, as shown by strong foreign capital inflows over the past few months, cited by analysts at Bank of America. This was helped by a weaker exchange rate, which made assets in the country cheaper: the real fell more than 20 percent against the dollar last year.
Although the benchmark index Bovespa recovered from the market crisis last March and rose slightly in 2020, it was lower in local currency in dollars. And analysts are confident about market valuations despite investor passion.
“Today the [valuation] Multiples in Brazil are not deviating from the historical average so I don’t think there’s a bubble, ”said Tiago Reis, founder of Suno Research.
Transactions in the pipeline include steelmaker CSN’s iron ore plant and Tok & Stok, a furniture chain supported by the private equity group Carlyle.
Pablo Riveroll, head of Latin American stocks at the London-based wealth manager Schroders, said Brazilian companies in the “new economy” are particularly attractive to foreign investors.
“There is a group of technology, IT and fintech companies that have received a lot of interest from foreigners, as well as companies related to renewable energy.”