By Paula Arend Laier
SAO PAULO (Reuters) – While Brazilian investors have endured two straight years without any local companies launching initial public offerings (IPOs), that could change in 2024, a senior Morgan Stanley executive told Reuters.
Marcelo Lo Re, the bank’s head of capital markets in Latin America, argues that conditions have improved, including demand and pricing, but probably not enough for fresh IPOs in what remains of this year.
“It’s more likely that (an IPO) will only take place in 2024,” Lo Re said in an interview, noting that the window for new listings “is not as open as observed in the 2020/2021 cycle.” There were 27 IPOs in Latin America’s biggest economy in 2020 and 44 in 2021, including so-called restricted offerings, but none in 2022 or so far in 2023, according to bourse operator B3. Follow-on share offerings accelerated in this year’s second quarter, however, and by the end of last month 18 transactions were executed, including at firms such as power company Copel and meatpacker BRF. Last month, 2W Ecobank hired banks to evaluate a potential IPO in Brazil, after it tried unsuccessfully to list shares in 2020.
Lo Re stressed that the dynamics of risk assessment are now “more challenging in relation to other asset classes.” The possibility of longer-than-expected high interest rates in the United States has put pressure on U.S. Treasury bond yields while dampening investor appetite for stocks. The Morgan Stanley executive argues that talks between companies and investors about potential offerings – follow-ons and IPOs – are ongoing, even if they have diminished in some especially turbulent markets. “It hasn’t slowed down,” said Lo Re. In Latin America, Brazil and Mexico will likely account for most stock offerings next year, he added, with the latter benefiting mainly from nearshoring, while in Brazil investors point to progress on discussions about fiscal rules and the tax reform plus falling interest rates.
(Reporting by Paula Arend Laier; Writing by Peter Frontini; Editing by David Alire Garcia and David Gregorio)