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Experts disagree on IPO’s and follow-ons records in Brazil for 2023

The year 2022 reversed the scenario seen in recent years for IPO’s (Initial Public Offering). If in 2020 and 2021 there were 74 debuts on the Brazilian stock exchange, the B3, – moving around R$ 109.5 billion, of which R$ 43.9 billion in 2020 and R$ 65.6 billion in 2021 – until December this year the stock market has had 26 delists and no IPOs.

Follow-ons were more present this year: 18 operations carried out in 2022, moving BRL 55 billion. Even so, the value was lower than in the last 2 years: 25 follow-ons moved BRL 73.9 billion in 2020, and 26 moved BRL 64.8 billion in 2021.

With the turn of the year and a new government in Brazil – with new fiscal and economic policies – , specialists consulted by CNN Brazil Business differ on expectations for 2023.

Although the forecast is for more significant movements in the market, the number of operations and the total amount will depend on the economic situation for the next year.

What happened

In 2020 and 2021, there was a movement — not exclusively Brazilian — to reduce interest rates. Although the world was experiencing the height of the pandemic, there was a lot of liquidity being injected into the economy by Central Banks, seeking to keep the market warm and prevent an aggravated economic crisis.

Experts explain that This made many investors, including individuals, evaluate variable income as a way to optimize yields. Investments pegged to the Selic and CDI rates began to depreciate significantly, especially when compared to the performance of the Ibovespa.

That liquidity caused significant cash flow to flow to startups, tech companies — and IPOs. “This monetary flow that came out of fixed income was one of the great motivators for the pricing of many IPOs in 2020 and 2021”, explains Teodora Barone, responsible for the Stock Market area at UBS Brasil Banco de Investimentos. “We had a perfect storm.”

In 2022, the year that begins trying to recover after the pandemic, sees a war break out at the end of February. The war in Ukraine aggravated the adverse international scenario. Closer to home, the polarized and uncertain scenario of the presidential elections increased the volatility of the stock exchange and, consequently, the caution of Brazilian investors.

The Central Bank of Brazil had already started a trajectory of increasing interest rates in March 2021, and given the facts at the beginning of this year, there was an expectation in the Brazilian market that these increases would last, and inflation would follow a similar path. This was not exclusive to the Brazilian scenario either — specialists warned of the risk of a growing recession in the United States, Europe and the world.

In this context, individual and institutional investors started to make their way back to fixed income. “In Brazil, individual investors are still starting to learn how to invest in the stock market. He is not a long-term investor, therefore, as soon as he sees an opportunity with more return and less risk, he tends to migrate to it”, emphasizes Teodora.

Therefore, from the third quarter of 2021, the Securities and Exchange Commission (CVM) began to register its first withdrawals. In January 2022 alone, for example, there were 14.

“This determined the reality of the stock market in 2022. We went in with a much more cautious view”, explains Roderick Greenlees, director of investment banking at Itaú BBA. “With all this volatility, the investor decided to stay out of a market considered to be of higher risk: the IPO market”, he adds.

What can happen

favorable scenario

Today, with the Selic rate at 13.75% and inflation accumulated over 12 months at 5.9%, 2023 is a year that holds many uncertainties for those interested in investing in new listings.

Teodora Barone and Roderick Greenlees say they are optimistic for the economic scenario and, consequently, for the resumption of IPOs and follow-ons next year.

For Barone, foreign investors from emerging markets have given positive signs that they will continue investing in the variable market here in Brazil. For her, they are the ones that will drive the IPOs next year — in which she projects 40 operations.

“On here [no UBS BB] we have 40 operations mapped out for next year — that is, eligible companies that would like to come to the market and that, for UBS, are able to go public”, he says. Operations that, according to her, will have to start from R$ 1 billion to be viable.

She points out that this number depends considerably on the interest rate — which is expected to begin a downward trend from the second half of 2023. “A point of uncertainty that still exists is the issue of the spending ceiling and fiscal stability in the country” , alert. But, assuming there’s nothing that’s under the radar, “and that next year will bring more positive news.”

Greenlees points out that there should be a lower number of IPOs than in 2021, but an important recovery in relation to 2022. For the specialist, these offers may start to happen as of the 1st quarter of next year, depending on the fiscal scenario.

Regarding the sectors that stand out for these offers, specialists highlight the defensive sector. That is, infrastructure companies — electricity (both transmission and power generation), sanitation and transport companies — oil and gas.

And from the 2nd half, evaluates Greenless, consumer and retail companies can try to start accessing the capital market, albeit to a lesser extent when compared to 2021.

Caution

Despite the optimistic forecasts, Mauro Rochlin, coordinator of the MBA in Strategic Management at FGV, believes that the country’s economic situation in 2023 will prevent the IPO market from reaching such prominent numbers.

The expert stated that the Focus Bulletin predicts a growth of 0.75% for the Brazilian economy, that is, it will be virtually stagnant. Added to high interest rates, Rochlin doesn’t see a context in which companies actively seek to go public.

“This scenario will cast some shadow over the capital market”, he argues. “I don’t think we’re going to have a spectacular year.”

Nicolas Borsoi, chief economist at Nova Futura Investimentos, believes that the forecasts seem “naive”, especially when looking at the calculated financial volume.

For him, the dynamics of 2023 are high interest rates and global recession. “We live in a difficult scenario, coupled with an international scenario that is also not very constructive for IPOs”, he explains.

Despite this, the expert believes that 2023 should be better than 2022, especially in the defensive sectors and sectors linked to commodities, due to the reopening of China. He also believes that there is a chance of an improvement in the number of follow-ons — but for IPOs, no.

“I believe that the prediction of interest rate cuts starting in the second quarter is too optimistic. You can’t even rule out that the Central Bank will maintain interest rates — perhaps even cut them,” he concludes.

* Under supervision Ana Carolina Nunes

Source: CNN Brasil

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