Six years ago, U.S. investment banks wooed Latin American companies and promised better access to investor pools.
Many firms like Stone and PagSeguro took the bait and went public on Wall Street. They aimed to replicate the success of American tech giants.
The results fell short. Stocks didn’t perform well and trading volumes were low.
Many analysts ignored these newcomers. Some investors even called them “orphans.”
Vitru, a Brazilian company, decided to move its stocks back to Brazil. Others are also reassessing their plans.
Gilson Finkelsztain, head of Brazil’s B3 exchange, said the past hype was “unusual.”
In the U.S., over a dozen such companies show low trading activity. They average less than US$4 million in daily trades.
Brazilian stocks in the U.S. have dropped 39% on average since their IPOs. This compares to a 35% drop for those listed in Brazil from 2020 to 2021.
Inter, a digital bank, moved its primary listing from Brazil to the U.S. last year.
Its daily trading volume plunged from US$16.5 million to US$1 million. Political unrest and inflation in Latin America played a role.
Investors opted for safer assets, sidelining lesser-known firms.
Roderick Greenlees from Itaú BBA predicts fewer Brazilian firms will opt for U.S. IPOs soon. He suggests the trend is changing and firms are becoming more cautious.
Background
The U.S. has been an attractive market for decades. Low interest rates around 2010 made U.S. listings even more appealing.
Tech companies in particular found a warm welcome. They lured global investors looking for high returns. However, the COVID-19 pandemic changed the investment landscape.
Inflation and rising interest rates caused a shift. Investors turned to safer, well-known options.
Now, the big question is whether these Latin American firms will continue to seek U.S. markets, or look closer to home.