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Return of IPOs Likely Delayed Until 2025, Even in Optimistic Scenarios

Writer's picture: Seneca Evercore | NotíciasSeneca Evercore | Notícias

(Folha de S. Paulo) Companies, however, continue active discussions with investors and banks, waiting for opportunities in the stock market.


At the beginning of the year, expectations were high that a new window for IPOs (Initial Public Offerings) would open in the second half of 2024 in Brazil. Back then, there was talk of interest rate cuts throughout the year, and analysts projected the Selic rate returning to single digits.


However, in the second half of the year, after forecasts indicated worsening inflation and Brazil’s Central Bank Monetary Policy Committee (Copom) put the possibility of interest rate hikes back on the table, analysts no longer expect companies to have the confidence to go public this year.


The country has been experiencing an IPO drought since 2022, after the Central Bank initiated an aggressive interest rate hike cycle and maintained the rate at 13.75% for a year until August 2023.


"Even before the Central Bank mentioned interest rate hikes, we were already skeptical about a resumption of IPOs this year. Now, this scenario seems even more distant, both from our perspective and that of the specialists we consulted," says Rafael Santos, partner and IPO specialist at Ernst & Young Brazil.


For Santos, it is still difficult to predict how the capital market landscape will look in 2025. Therefore, he avoids making projections.

"There’s a high risk of being wrong in forecasting. 2025 could be a better year, but we still need to overcome some challenges. We’re hopeful for 2025 — that’s the right word. We’re not optimistic; we’re hopeful," he says.


Beyond inflation concerns and the possibility of interest rate hikes, Santos notes that Brazil also needs to solidify an economic reform agenda and better organize its fiscal policy.

Despite the unpredictability, experts point out that companies remain enthusiastic about the next IPO window in the country. According to Santos, EY is experiencing higher-than-average interest from companies wanting to assess their readiness to go public. "They’re doing their homework," he says.


Leonardo Resende, Superintendent of Corporate Relations at B3, echoes this sentiment. He explains that IPO opportunities often arise quickly, which is why companies understand the importance of being prepared.


"What we’re seeing now are ongoing conversations with investors. Banks continue to provide advisory services, conferences are happening, and there’s very active dialogue with investors to ensure that business owners are well-informed when making decisions," says Resende.


The B3 Superintendent emphasizes that one of the key factors determining whether a company decides to launch an IPO is the valuation it would achieve. In other words, business owners want to know the price at which their shares will be offered and the financial returns they will receive from selling a stake in their companies.

In the last ten years, 93 companies have gone public on the São Paulo Stock Exchange, with 85 still listed. Most of these IPOs occurred between 2020 and 2021, during a boom in the sector.


Among the currently listed companies, after adjusting their IPO prices based on the accumulated CDI (a benchmark rate in the capital markets), only seven companies — 8.2% — achieved a positive performance compared to their initial offering prices, according to research by Seneca Evercore. These companies are Ambipar, Cury, GPS, Orizon, PetroReconcavo, Caixa Seguridade, and Wilson Sons.

In nominal terms, without CDI adjustments, 22 companies — 25.8% — posted positive performances relative to their IPO prices, according to Seneca.


The worst-performing companies tend to be those more sensitive to interest rate hikes, such as those in the technology, retail, and real estate sectors. These industries led IPO activity between 2020 and 2021 when a lower Selic rate boosted the country’s stock market.

"This price needs to be appealing to both the entrepreneur and the investor, considering returns, for IPOs to happen. This is where interest rates come into play," says one expert.

"The fixed-income market has been very attractive for financing companies. In 2024 so far, we’ve seen a higher volume of private fixed-income issuances — such as debentures, CRIs, and CRAs — compared to the total for 2023. So, financing is happening more through debt and fixed-income vehicles and less through equity offerings," the expert adds.

For Daniel Wainstein, founding partner of the financial advisory firm Seneca Evercore, multiple factors would need to align for an IPO window to open in the short term.


Many analysts anticipate that interest rate cuts by the Federal Reserve, the U.S. central bank, could create a more favorable environment. However, Wainstein notes that this is unlikely to impact Brazil's Selic rate, given the country’s strong economic activity.

On Wednesday (September 4), the Brazilian Institute of Geography and Statistics (IBGE) reported robust GDP growth of 1.4% in the second quarter. This acceleration far exceeded the 0.9% forecast by the market, according to Bloomberg data.


Wainstein believes that if a new wave of IPOs doesn’t occur in 2025, it won’t happen until 2027, as 2026 will be an election year, creating significant financial market uncertainty, particularly due to the polarization seen in recent years.


For Wainstein, however, the lack of IPO opportunities isn’t necessarily a bad thing. He points out that the credit market has evolved, and companies have been able to raise capital by issuing long-term debt at favorable terms, bypassing the stock market and traditional bank financing.


"The absence of IPOs is no longer the catastrophe it once was," he says. "Going public is no longer the only way to raise capital, which is positive. IPO windows typically occur every ten years on average, and many companies would rush to go public unprepared, which is harmful for both the company and its shareholders," he concludes.



Over the past ten years, 93 companies went public on the São Paulo Stock Exchange, with 85 of them still listed. The vast majority of these IPOs occurred between 2020 and 2021, during a boom in the Brazilian market.


Of the companies still listed, only seven—equivalent to 8.2%—showed positive returns compared to their initial offering price when adjusted for the accumulated CDI rate, a benchmark in the capital market, according to a study by Seneca Evercore. These companies are: Ambipar, Cury, GPS, Orizon, PetroReconcavo, Caixa Seguridade, and Wilson Sons.


In nominal terms, without the CDI adjustment, 22 stocks, or just 25.8%, posted positive performance relative to their IPO price, according to Seneca.


Among the companies with the weakest performance are those most sensitive to rising interest rates, such as those in technology, retail, and real estate. These sectors dominated IPO activity between 2020 and 2021, driven by the lower Selic rate that fueled the stock market at the time.



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