Will 2020 Be Year for Small-Sized Companies on Brazilian Stock Market?

RIO DE JANEIRO, BRAZIL – From the investor’s side, a search for higher yields in a low-interest environment. On the corporate side, the need to capitalize in order to grow.

This scenario leads banks, funds, and the Stock Market to believe that smaller-sized companies will finally be able to access the capital market and offer their shares to the public.

“We have been sought by many small-sized companies that want to understand how they can access the market and today there is a favorable environment for these offers to succeed,” says Felipe Paiva, director of customer relations at the B3, the Brazilian Stock Exchange.

Currently, the Brazilian market has an average volume of US$600 million in its share offerings – worth four times the global average of US$139.8 million.

“Comparing with international markets, we see that there is a very large space for the small and medium-sized business segment to grow,” says Paiva.

The B3 is organizing a program to offer training and lectures to executives of companies interested in going public.

“It is a program that involves training and meetings with executives from companies that are already listed. We want to promote the exchange of experiences in various fields such as legal, investor relations and financial management,” says Paiva. According to him, the program should be launched by the end of the first semester of 2020.

Historically, one of the obstacles to the access of small and medium-sized companies to capital markets was the lack of interest of financial institutions in preparing these companies for their offers, according to experts.

But this scenario also seems to be changing. The ABC Bank recently launched a platform to attract what it called “emerging companies” – regional companies with annual revenues starting at R$250 million – to make an initial public offering (IPO).

“Today, Brazil has a very small number of listed companies, some 330, while in the United States there are more than 5,000. We already have a close relationship with these companies and today we can prepare them for an IPO,” said José Eduardo Laloni, vice-president of ABC Bank and in charge of coordinating the initiative, during the project’s launch.

According to the executive, the first offers are expected to take place as early as 2020.

“There are other medium-sized banks preparing to follow the same path as the ABC. In addition, larger banks and institutions like XP Investments have a larger capital market team than before, so they can focus on both large and small offers,” says Alvaro Gonçalves, a partner at Stratus, which is studying how to bring some of its portfolio companies to the stock market in 2020.

A new Bovespa Mais (“Bovespa Plus”)?

The heating up of the market has put the ‘Bovespa Mais’ program under the spotlight again, launched 15 years ago to attract smaller-sized companies to the market.

Over the years, the B3 – a company founded in 2017 with the merger between BM&F Bovespa and CETIP – made some changes to improve incentives, but nothing worked. Today, opinions on the program differ.

“We always discussed how to improve Bovespa Mais, but nothing came of it because there was no demand from investors. Today this demand exists due to the drop in interest rates,” says Jean Arakawa, a partner in the Capital Markets area of Mattos Filho law firm.

Source: Infomoney