IPOs weren’t a thing in Brazil this year

It is nearly December, and we are still waiting for the first Brazilian initial public offering this year. At this rate, Brazil is set to see its first year without IPOs since 1998.

While analysts were expecting the recent IPO spree to recede, the challenging macroeconomic scenario and smaller appetite for variable income had an even bigger impact on the market than anticipated. And projections for 2023 are growing grimmer.

To understand why 2022 is going IPO-less, we need to look back at what happened to recent entrants in the stock market.

A total of 28 Brazilian companies went public in 2020 and 45 did so last year, amid a global flurry of IPOs that saw 2,400 initial offerings, per EY Global IPO Trends. These deals generated USD 453.3 billion in revenue.

The superlative numbers were driven by extremely low interest rates and greater liquidity, which made investors turn to riskier assets with bigger rewards. As the pandemic forced companies in retail, services, and many industries to close their doors due to sanitary restrictions, central banks around the world began to slash interest rates as an opportunity to boost economic growth.

In this scenario, the advantages of investing in Brazil grew strong. Between August 2020 and March 2021, the country’s benchmark interest rate Selic stood at an all-time low of 2 percent.

The tide began to turn already in Q3 2021. For starters, about two-thirds of all initial public offerings made that year were completed in the first semester. Besides that, the second half of the year was marked by the interruption and cancellation of offers, with more than 60 companies making U-turns after initiating IPO processes.

Those which did go public failed to make a bang. While the Brazilian market had its second-highest number of IPOs ever (only trailing 2007, when 64 companies went public), their offerings raised less money than in 2020. 

Per the Brazilian Association...