
(O Globo) According to a study by Seneca Evercore, 74 Brazilian companies went public since 2018, but only 12 of them achieved nominal gains compared to their IPO price.
Initial public offerings (IPOs) have the potential to attract new individual investors to the capital markets, but the reality of recent years has been one of disappointment for these newcomers.
Mariana Barbosa
Since 2018, 74 companies debuted on the Brazilian stock exchange, but only 12—16% of the total—showed nominal gains compared to their IPO price, as revealed in a study conducted by investment advisory firm Seneca Evercore.
When compared to the accumulated CDI (Brazil's interbank deposit rate) since their market debut, only three companies (4%) posted positive performance: Cury Construtora e Incorporadora (CURY3), Orizon (ORVR3), and Caixa Seguridade (CXSE3).
— "The risk of investing in an IPO remains significantly higher than investing in a stock with a long performance history. Our experience in Brazil shows that only a few companies that go public end up becoming good investments. In this context, identifying the few winners in this race is extremely challenging. In a country with such high real interest rates, there needs to be something exceptionally strong and compelling for an individual investor to consider allocating a significant portion of their savings to IPO stories in Brazil," says Daniel Wainstein, managing partner at Seneca Evercore.
The IPO drought on the stock exchange has lasted nearly three years. The last company to go public was Vittia, in August 2021. That year saw 46 IPOs, raising a total of R$65.6 billion.
— "The current environment presents higher risks for this type of investment than what we observed, for example, at the beginning of the year. The Brazilian stock market, like other local assets, faced significant pressure throughout the second quarter of 2024. Although part of the weak performance can be attributed to global factors, such as high U.S. interest rates, the recent downturn is mainly driven by local issues. Factors such as the lack of a credible fiscal policy anchor and an inconsistent approach to monetary policy—especially given the inconsistent messaging from the federal government—are driving the demand for higher risk premiums. The recent unanimous decision by the Central Bank to maintain the current Selic rate provided some reassurance to the market, but a high level of uncertainty persists among investors, which obviously hinders the performance of our stock exchange," says Wainstein.
Published in O Globo on June 25, 2024.
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