Investment banks predict an end to Brazil’s two-decade IPO hiatus, possibly in this year’s second quarter.
This revival follows a significant period without initial public offerings (IPOs).
Leading banks, including Bank of America and Morgan Stanley, expect an upturn in market activity.
This optimism is partly due to the Federal Reserve concluding its monetary tightening and anticipating further cuts to Brazil’s Selic rate.
As per the Bank of America’s analysis, various sectors, including infrastructure, retail, technology, and real estate, are likely to enter the market by 2024.
These anticipated offerings are part of a global recovery in IPOs and follow-on offerings.
The stagnation in these areas has been due to U.S. interest rate adjustments reducing investor interest in stocks.
Brazil could gain from a decrease in the U.S. as an emerging market.
60% increase in sales
Fábio Nazari of BTG Pactual notes that the conditions for company listings are the most favorable they’ve been in three years.
BTG Pactual, which led last year’s Brazilian equity offerings, expects a 60% increase in sales from the previous R$40 ($8) billion.
The last Brazilian IPO was in September 2021 with Vittia, and Nubank’s U.S. listing in December 2021 was the most recent Brazilian company’s initial offering.
However, Brazilian equity offerings fell by 34% to R$39.6 billion in 2023, marking a difficult year for investment banking revenues.
This downturn was influenced by U.S. bond market stress and significant redemptions from multi-market and domestic stock funds.
As Brazil’s interest rates decrease, Marcello Lo Re of Morgan Stanley predicts more investors will be attracted to riskier assets like stocks.
2W Ecobank and Sigma Lithium have already expressed interest in potential listings. While Sabesp is preparing for possibly the country’s largest stock sale this year.
Despite the optimistic outlook, risks include a potential sharper economic slowdown in the U.S. and delays in Federal Reserve rate cuts.
Executives expect a gradual stock market recovery, led by follow-on offerings and block trades.
Bruno Saraiva of Bank of America in Brazil views the current economic conditions positively.
He believes a world with stable inflation, declining interest rates, and predictable economic growth is more reliable, setting a promising stage for the future.