10 of 65 IPOs in 2020 and 2021 accumulate high – 04/21/2023 – Market

From the beginning of 2020 to the end of 2021, taking advantage of historically low interest rates to face the economic effects of the Covid-19 pandemic, a record number of IPOs were registered in Brazil. In the two years together, 65 companies sought funding via an initial public offering (IPO).

Almost two years have passed since the last of these offers was closed, from the drug manufacturer Viveo, in August 2021, the balance is negative for those who believed in these companies from the beginning.

Only 10 of the 65 shares launched on the market between the beginning of 2020 and the end of 2021 show positive performances since the debut. According to a survey by the QuantBrasil platform, returns range from an increase of almost 68% to a fall of almost 94%, from the date of the IPO to April 5th.

Among the worst performers on the list are companies from various segments, but which have, in common, a more technology-oriented profile.

The negative point among the IPOs is with the common share of Espaçolaser, a company that has Xuxa Meneghel as a partner. The shares have fallen 94.77% since the IPO, which took place on the first day of February 2021.

The company is outside this more technological profile and, according to analysts, its activity, laser hair removal, is penalized in a scenario of high inflation and stagnant income.

Soon after, the list of biggest falls since the IPO is dominated by companies that operate with online commerce and services, or even companies that manufacture technological components.

The ordinary share of the electronic furniture store Mobly has accumulated a drop of 92.693% since its IPO, also in February 2021. 86%.

Other companies with drops greater than 90% since going public are TC (Traders Club), a platform aimed at investors, Enjoei, an online clothing retailer, Westwing, an online furniture and decoration store, and Alphaville, a construction company specializing in horizontal condominiums and urbanism.

Companies such as Multilaser, which sells accessories for computers and cell phones, GetNinjas, which offers domestic services via application, Cruzeiro do Sul, in education, and Banco Modal have fallen by more than 80% since they went public.

Ivan Barboza, a partner at Ártica Investimentos, says that the IPO is hardly a good deal for investors. In the scenario in which these operations were carried out, with interest at 2% per year to face the pandemic, this trend was even greater.

“We, in Ártica, never entered into an IPO, and I don’t recommend it to anyone. What happens is that many pension funds, mainly from abroad, had a lot of money to invest. They made these operations possible”, says Barboza.

Ártica is a relatively small manager, which reached BRL 200 million in invested funds. With a strategy of deeply studying the relationship between prices, results and the business environment of each company, the Ártica fund has an average return of 29% per year since 2013, and the accumulated return is almost 950% in ten years.

Idean Alves, partner and head of the operations desk at Ação Brasil Investimentos, agrees that the companies took advantage of an opportunity, with “money left over” due to the injection of funds by central banks and the search for higher returns on variable income, with negative real interest rates worldwide.

“Many companies presented share prices far beyond the level they could actually deliver in results, focusing on the potential and on the last balance sheets before the operation, which were strong precisely because of the preparation for the IPO”, says Alves.

the good deals

At the positive end of the list is the common stock of Vamos, a company that leases trucks and other heavy vehicles. Since it went public in January 2021, the stock has risen 67.77%, according to data from QuantBrasil.

In a report to comment on the results for the fourth quarter of 2022, Banco Safra analysts reinforce the recommendation to buy the share.

“Our preference for the company is mainly explained by its solid and consistent operating performance, which should persist considering the huge and still little explored market for heavy vehicle rental companies”, say Safra analysts.

In early April, the company announced the acquisition of Tietê Veículos, a truck and bus dealership for the Volkswagen brand.

For analysts Pedro Bruno and Matheus Sant’anna, from XP Investimentos, the acquisition is positive for Vamos, as it reinforces the brand’s leadership position in heavy vehicle dealerships and practically does not change the company’s debt level.

Another highlight since the IPO is Orizon, a company that operates in the recycling of solid waste, to transform it mainly into renewable energy.

In a report about the company released at the end of March, XP Investimentos questions whether Orizon is a “young giant”. Analysts Herbert Suede and Maíra Maldonado raised the company’s share target price from R$30 to R$40. This Wednesday, the stock closed at almost R$36.

The update took place after some acquisitions made by Orizon, which increased the waste treatment capacity. The company also managed to increase the prices of energy sold by one of its parks, in Barueri (SP), and benefited from the increase in carbon credit prices.

For XP, Orizon still has great growth potential, with predictable revenues and the difficulty for competitors to enter the segment in which it operates.

In the high list, the presence of Intelbras stands out, with an increase of almost 30% since the IPO. For analyst Richard Camargo, from Empiricus Research, the company has the potential to become a good dividend payer.

“Despite not being a cheap stock, this is an investment story with organic growth of 30% per year, margin expansion capacity and a conservative capital allocation profile, which generates cash”, states Camargo.

Is there salvation for those who are down?

For Ivan Barboza, from Ártica, it is difficult to envision a recovery scenario for these companies. “Some of them even have good potential, they even manage to generate cash. These might suddenly find a buyer, an investor. But we don’t have any of them in the Artica portfolio.”

Méliuz, a cashback company that has accumulated a 44% drop since its IPO, has already adopted this option by making a commercial agreement with BV (formerly Banco Votorantim). In the transaction, the bank acquired 3.85% of Méliuz’s capital, with an option to buy another 20% that still belong to the company’s founding shareholders.

For Barboza, Multilaser is one of the cases that could improve if the macroeconomic environment becomes more favorable. “It is a company with good market share in its segment, but it is inserted in the retail environment, and it depends on the economic cycle”, says Barboza.

For André Fernandes, Director of Variable Income and partner at A7 Capital, any sign of a drop in interest rates should help in the recovery of several of these companies that are currently facing difficulties on the Stock Exchange. But he also urges caution.

“Investors must be careful about where to invest their resources. Many of these companies are extremely indebted in relation to the sector’s average, as they have not been able to roll over or structure their debts well”, says Fernandes.