RIO DE JANEIRO, BRAZIL – According to Bank of America Corp., stock offerings by Brazilian companies will likely reach more than R$159 (US$31) billion this year, which should surpass 2020 as the strongest ever.
Through August 30, the total raised stands at R$126 billion, a 40% increase over the same period in 2020, data compiled by Bloomberg show. Initial public offerings (IPOs) have already reached a record high.
In contrast, retailer Magazine Luiza and hospital operator Rede D’Or São Luiz have resorted to follow-on offerings to fund acquisitions and post-pandemic growth.
“It’s a spectacular year, in which the capital markets have really been a lever for economic growth in Brazil,” Bruno Saraiva, co-head of investment banking at Bank of America in Brazil, said in an interview.
“A substantial part of the funds were used to finance investments and expansion plans,” he said, in contrast to last year, when shareholder outflows accounted for a large part of the total.
After a strong second quarter, Saraiva expects a “less intense” period in the coming months, mainly because of the interest rate hike the Central Bank is promoting to tame inflation.
“As interest rates rise, the market becomes riskier,” he said. “But even with more selective investors, the window is still open for good stories with correct pricing,” he said, citing sectors such as consumer, healthcare, and technology as likely issuers.
Forty-five Brazilian companies have gone public this year, and about 30 are in line for a local listing.
According to data compiled by Bloomberg, BofA ranks third among banks coordinating Brazil’s equity offerings so far this year.
The bank has participated in eight of the ten largest offerings, including the R$6.9 billion IPO of biofuels company Raízen, the largest this year, the data show.
Considering the IPO of Pátria, which is based in Grand Cayman but operates predominantly in Brazil, BofA led nine of the 10 largest sales of shares of Brazilian companies this year.
According to Saraiva, BofA has doubled its investment banking team in Brazil in the past 24 months and sees room to continue expanding. Plans include strengthening its local fixed income business as well as its mergers and acquisitions advisory operation. “When a company raises capital, the next step tends to be an acquisition, so we expect M&A activity to increase,” Saraiva said.