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Brazil IPOs in 2021: Contextualized context

Is a slew of pulled deals really a sign of a healthy IPO market?

Rob Dwyer Latin America COLUMN MAIN 1920px.jpg

In the last couple of months, about 20 Brazilian IPOs have been pulled. Sounds, bad, right? Wait though, you need the context.

First, this has been a very strong year for equity issuance – it’s going to be a record year for the Bovespa. In the middle of October, it passed R$100 billion ($19.2 billion), already beating 2019’s total of R$90 billion. Brazil has clocked up 25 IPOs this year – after just five in 2019 – and 2006’s record of 26 will almost certainly be broken.

Those cancelled IPOs are really mostly delayed. UBS BB’s chief executive, Daniel Bassan, is just one of many who argue that the slew of pulled deals is just a healthy sign of a market struggling to absorb a bottleneck of too many deals after many stepped back from the market in the first half of the pandemic-hit year.

The markets were simply “flattening the curve” of equity deals he says. Investors need more time to absorb each story and the market has to realign accordingly. Reprioritize.

The consensus call seems to be that 2021 will pick up from the record-breaking 2020. International flows have finally turned positive again and the local demand for equities seems to be a given, forced to venture out of its traditional fixed income fortress by collapsing yields that have led to once-in-a-generation negative real rates.

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