Three Latin American equity transactions in mid-July demonstrate just how selective investors are being. Brazilian transmission company Taesa sold BRL1.76 billion of equity at the middle of its range (the deal was dubbed a “re-IPO” due to the small amount of listed shares) and Mexican comercial real estate company Vesta sold a MXP3.3 billion IPO, pricing at the bottom of its range. However, in the same week Louis Dreyus’ Brazilian bioenergy subsidiary Biosev failed to price despite 40% participation of controlling shareholders.
“There is a lot of liquidity out there but there is no appetite for risk. You see bond yields in developed countries having negative yields and so risk appetite is simply not there,” says Ignacio Mendive, head of cash equity in Latin American and head of equities in New York for Santander . The bank managed the Taesa and Vesta transactions and was bookrunner on the Biosev deal. “For deals to be successful they need to be in certain sectors, with clear business models and projections. They also need strong management teams with proven performance and high dividend yields. These are the stories that appeal to investors. If you have those characteristics there is liquidity; there is investor interest and you can get deals done.
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