Brazilian firms surfing corporate reorganization wave as IPOs dry up

Over the past two years, the Brazilian stock exchange has seen an unprecedented wave of startups going public, creating the domestic market’s very own tech sector. However, throughout 2021, the Central Bank’s push to control inflation by jacking up benchmark interest rates caused liquidity to run dry. Now, for 2022, this trend is likely to scare away newcomers and spark a spate of corporate reorganizations, with an eye on taking IPOs to international markets.

The shift began in Q3 2021, as it became clear the Central Bank would be even more hawkish than expected in its interest rate hikes.

This is not the only underlying factor: ESG principles are becoming stronger around the world, meaning that governance improvements offer an opportunity to unlock value. Furthermore, companies are willing to have more efficient cost structures to show resilience or growth amid the harsh conditions imposed by Covid-19. And finally, tech outfits are ready to fundraise in even larger ponds, such as New York.

While reorganizations are being seen in several industries — energy being a prime example — the most emblematic cases are those related to tech companies willing to go public abroad. Digital bank Banco Inter announced its desire to migrate to New York, but the operation failed due to market conditions: several shareholders opted to sell their shares as the bank bought them back for above-market prices. 

The demand was so strong that it exceeded the BRL 2 billion (USD 350 million) limit established by the bank, forcing it to cancel its plans. However, Inter has told the market it will take a second bite at the cherry.

Analysts...