Why have Brazil’s 2021 IPOs bombed?

Over the past couple of years, a flurry of IPOs in Brazil has become synonymous with the success and resilience of Brazil’s capital market in the face of recession and the pandemic. Yet, while 2021 is still poised to be a record year, the first cracks are starting to appear. Early data shows that the performance of IPOs is well below expectations, despite the amounts raised by newcomers.

A study by investment analysts Nord Research shows that, by late September, 58.7 percent of the companies who joined the B3 stock exchange in 2021 saw negative returns, while only 14 out of 46 companies saw double-digit gains.

For Nord Research partner and analyst Danielle Lopes, underwhelming performance is the result of a combination of factors: higher interest rates and an economic environment that was worse than markets priced in, as well as investors becoming more selective with assets.

“When the economic scenario is poor, the market literally crushes companies with poor fundamentals, especially those that promised good results in the IPO...