Demand for Eletrobras papers already exceeds supply by 50%

Eletrobras already has demand to sell its shares in the offer that will mark its privatization, which could move more than R$ 35 billion. According to Estadão, orders made by large investors already exceed the volume of the offer by about 50%. And that’s not counting the money that will come from individuals, who will be able to use the resources currently invested in the Severance Indemnity Fund (FGTS) in the papers, and also the group of priority ones, such as the current shareholders and employees of Eletrobras.

The offer was launched last week and, since then, the company’s management and banks have been in a fast pace of meetings with investors to define the share price, which will be announced next Thursday (9).

The value depends precisely on the investors’ appetite, which is classified by market sources as quite high. Demand has been strong even at a time of risk aversion in markets around the world, as the stock is expected to have great upside potential after privatization.

This is the largest offering of shares on the Brazilian stock exchange since the mega-capitalization of Petrobras, more than ten years ago. As the price will only be defined next Thursday, the expectation is that interest will heat up even more until then.

The coordinators of the offer are BTG Pactual (leader), Bank of America (BofA), Goldman Sachs, Itaú BBA, XP, Bradesco BBI, Caixa, Citi, Credit Suisse, JPMorgan, Morgan Stanley and Safra.

Expectation

The operation was launched with the support of ten funds, which should buy around R$ 15 billion in shares. According to sources, this group made an offer below R$ 40 per paper, but the bet behind the scenes is that this price will rise. At the launch of the offer, the share was at R$44 – today, it is around R$42.

As it is a privatization, there is a minimum price for the sale of each share of the state-owned company, something that has already been defined by the Federal Audit Court (TCU). But the value is kept secret. In practice, this means that the offer will only take place if investors agree to pay a price above what was established as a floor.

The main ace in the sleeve in the process, however, was the release of the use of FGTS resources for individuals to participate in the offer, with a limit of R$ 6 billion.

The reservation period for this public began yesterday and will continue until next Wednesday, the same period determined for investors who fit the priority offer to express interest in participating. Another R$ 3 billion may be purchased by individuals who do not have funds in the Guarantee Fund.

At the end of the process, the Union will have its participation reduced to less than 50% – that is, it will no longer be the controller of the energy company. The forecast is that the share that currently belongs to the government, adding the Union and BNDES, will go from the current 60% to around 33%, according to the offer’s prospectus. The privatization model is the same as that used by the former BR Distribuidora, which belonged to Petrobras and was renamed Vibra.

Appetite

The market sentiment in relation to Eletrobras is reflected in Gustavo Fabrício’s bet by RPS Capital. The manager wants to at least double its position in Eletrobras. Henrique sees the potential for shares to appreciate more than 100% in the medium term.

“Eletrobras has a lot to do and this is encouraging the market. It is the largest company in Brazil and has a higher cost than its competitors. With more professional management, there will be a lot of upside potential for the shares”, says Fabrício.