Equity capital markets: Mexican issuers return to IPO market
First debut deals in nearly two years; Bankers expect more regional issuance
of Chedraui’s stock distributed locally, compared with historical average of 25%
Two deals in a matter of days hardly constitute a flood but in Mexico’s equity markets they mark the end of a long drought. Last month retailer Grupo Comercial Chedraui and investment fund and brokerage house Actinver launched the country’s first IPOs in nearly two years, with bankers hopeful that more deals will follow, market conditions permitting. First out of the block was Chedraui, the fourth-biggest supermarket chain in Mexico. It raised Ps5.2 billion ($404 million), including the greenshoe over-allotment option, with the shares priced at Ps34 – the lower end of the pricing range. The tactic worked as the shares traded up 5% the following day.
The deal’s success was an important step not just for Mexico but also for the equities market in the region overall, given how poorly IPOs out of Brazil have performed this year. While transactions generally need to be of a certain size given the premium that investors are placing on liquidity in these volatile times, Chedraui proved that mid-sized deals can fly as long as the company has a good story to sell.