With stock market on the rise, IPOs are starting to return, says Empiricus – 06/28/2023 – Market

The probable start of the cycle of interest rate cuts in August by the Central Bank (BC), and the impulse that the movement may trigger for stocks to rise on the Stock Exchange, should contribute to the resumption of IPOs. of Brazilian companies.

The assessment is by Felipe Miranda, CEO of Empiricus. “I don’t think it’s that far away from the IPO window. I think 120,000 points [do Ibovespa] reopens the IPO window”, said Miranda, during an event promoted by BTG Pactual this Wednesday (28).

This Wednesday, the Ibovespa was trading in the range of 117 thousand points, with an accumulated increase of around 7% in the year.

The last IPO on B3, the Brazilian Stock Exchange, was in December 2021, with the simultaneous offering of Nubank in Brazil and the United States. In 2022, in a scenario of high interest rates and economic and political uncertainties, the Brazilian market did not record an IPO for the first time since 1998.

The Empiricus executive stated that he foresees that new IPOs may happen in 2023. He pointed out that the follow-ons, which are the stock offerings of companies that are already listed on the Stock Exchange, have been “very successful”, with relevant participation of foreign investors in operations of companies such as Orizon, Smartfit and Assaí.

“It seems quite reasonable to me that we see a return of IPOs at the end of the year, selectively”, stated the CEO of Empiricus, adding that the Minister of Finance, Fernando Haddad, has been developing a “beautiful job” and that Congress has indicated that will bar initiatives that seek to reverse reforms approved by previous governments. “With that, I think the foreigner looks fondly at Brazil again.”

The new wave of IPOs, pointed out the expert, should no longer be for companies that are not yet profitable, but just a projection that will have accelerated growth years ahead, which were benefited by the scenario of extraordinarily low interest rates. With the level of interest more normalized, companies with cash generation and long history of results should go public, said the executive.

According to data cited by Miranda, on average, over the last seven cycles of monetary tightening, the market underestimated the intensity of cuts in the Selic rate by around 1.5 percentage points.

“The market is waiting [a Selic] going to 9.5%, 10% at the end of next year. If he’s underestimating the mowing cycle like he has in the past, we’re talking 8%. An 8% interest rate Brazil is very different from a 14% interest rate Brazil. As this becomes clear, the flow returns intensely to the Stock Exchange”, said the CEO of Empiricus, an investment company that is under investigation by the PF (Federal Police) due to a video released in the middle of last year in which a woman dressed as clown criticized the company TC.