2021 started well for IPOs, but over the months, the windows have closed and the year ends with no new entrants, with the exception of Nubank, which in practice makes a double listing, but the registration of shares takes place even in New York . In addition to this new path that we saw throughout the year, of Brazilian companies seeking the “American dream” with their listing abroad, there was another subterfuge for the conclusion of some operations, with the so-called “Ofertas 476”.
There are two types of public offerings: standard and restricted efforts. The main difference between the two is the target audience. The standard public offering, which does not require restricted distribution efforts – also known as Offer 400 – is aimed at all investors, whether institutional (banks, funds and insurance companies, for example) or non-institutional (individuals or legal entities participating by market themselves, taking the risk on their own).
The offer with restricted efforts – or Offer 476 – is exclusively for professional investors, that is, institutional or individual, as long as they have assets above R$ 10 million or have some specialized investment certification. As it is aimed at a more specialized audience, Offer 476 has fewer bureaucratic obstacles. For example, it is not necessary to register and analyze the company with the CVM, nor to prepare the offering prospectus.
Such flexibilities do not exist in Offer 400, in which the company must register with the CVM and submit the offer for analysis by the regulatory body, in addition to the obligation to prepare a prospectus – document in which all important information of the offer is gathered, such as factors of risk, allocation of funds raised and financial statements, with the objective of making investors aware of all aspects of the IPO.
to numbers
Knowing the difference between the types of offers, we can look at some numbers in search of statistical conclusions that help us understand investors’ assessment of these processes. Of the 45 initial public offerings in 2021, 33 were made through Offer 400, which totaled BRL 55.3 billion, of which BRL 38.1 billion in primary distribution. The 12 Offerings 476 had a volume of BRL 9.9 billion, of which BRL 7.7 billion in primary offering.
But what about in terms of stock market performance? See below the performances from the IPO to the close of December 17th, as well as the Ibovespa fluctuation in the respective periods.
Overall, stock market newcomers suffered more than the market average. Comparing the performance of shares that arrived on the stock exchange through Offers 400 or 476, there seems to be an advantage of operations that were restricted to the professional and qualified public. Offers 476 had a less negative average performance, the stock with the best performance since the IPO, as well as its worst decline was less than the largest devaluation among Offers 400. Furthermore, proportionally this group of restricted offers performed more positively or better than the Ibovespa, while 4 of the 5 companies that lost more than 70% of their initial value came from 400 Offers.
The nickname “Offer 476” refers to CVM Instruction 476, which provides for public offerings of securities
securities distributed with restricted efforts and the trading of such securities. Although created in 2009, only last year companies started to use this institute for initial public offerings, with Aura and Alphaville. Until then, the instruction was used in follow-ons, with 103 offers since 2015. It was only from 2021 that CVM Instruction gained more adhesions in IPOs, in general with companies looking for a quick placement of offers to take advantage of the windows of liquidity.
It was also the path found by companies that tried to carry out the IPO via CVM 400, failed and returned through CVM Instruction 476. These were the cases of most companies that listed on the B3 through restricted offers, such as Dotz, Agrogalaxy, Viveo, Kora Saúde and Vittia. All of them had processes in progress in public offerings, but in general they had difficulties in finding demand.
senseless breach
At the end of September, the assets arising from Offers 476 were at the center of a controversy, after CVM and B3 tried to correct a loophole that had been wide open for some time. After all, assets from IPOs 476, that is, which were offered exclusively to professional investors, could be traded freely on the secondary market by any investor, including retail (who were excluded from these offers). This was minimally contestable, as it might not make sense to restrict the IPO to theoretically more qualified investors, but release it to the retail investor right after the stock debut. That is, the instrument that could protect the non-institutional public from making an adverse selection for having less information, then vanished.
In order to comply with CVM Instruction 476, B3 and brokers blocked trading in the secondary market for the retail investor of assets that came to the market as a result of this legislation. This blocking must occur within 18 months following the completion of each offer. The problem is that this was done abruptly and after these assets were widely distributed across the market. Overnight, retail investors who bought these shares freely on the stock exchange were prevented from trading these assets they were in custody.
Finally, what we can see is that shares arising from Offers 476 had an average performance better than Offers 400. As we are talking about a year of generalized declines, unfortunately the “best” in many cases was “fall less”. But I believe this is one more example that no one is better than the market to make a natural selection of companies that could be better prepared to go public. Despite the initial difficulties to be accepted, at least under the conditions in which they were offered to the general public, the IPOs that resumed via Offer 476 performed as the market average, while the IPOs 400 suffered much more.
Did they offer the “filet mignon” only to professional/institutional investors? I tend to be averse to conspiracy theories, proof of this is that the offers came to the general public, needed to be reformatted and resumed in a restricted form. But I believe in more access to information and analytical capacity for professional/institutional investors, which is natural, since there is an exclusive dedication and specialization.
Alexsandro Nishimura he is an economist, head of content and partner at BRA, an accredited office at XP Investimentos. He graduated from UFF and holds an MBA in Finance from IBMEC. He is a certified financial planner (CFP®️) and responsible for the production and distribution of content to BRA customers. It has been operating in the financial market since 2005, dedicated to the production of content for individual investors. He started his career in the consulting area at Lopes Filho & Associados, where he worked as an investment analyst, assembling recommended portfolios and analyzing real estate investment funds. He was Head of Content at MyCAP Investimentos, a Brazilian operation dedicated to individuals at the largest brokerage in the world, TP ICAP, where he was responsible for the Research and Marketing departments.
Source From: Moneytimes
I am an author at Global happenings and I mostly cover automobile news. In my time working in the automotive industry, I have developed a keen interest in the latest developments and trends. My writing skills have also allowed me to share my knowledge with others through articles and blog posts.
