The success of Brazil’s PagSeguro’s recent IPO on the NYSE has led its competitor, Stone, to draw up plans to launch on the US stock exchange this year, according to market sources.
PagSeguro, which provides online and in-store payment services, raised $2.3 billion in January this year.
This general rarity of technology company IPOs from Brazilian companies helped the IPO launch above its pricing range and the stock traded up 33% on its first day of trading. If Stone follows PagSeguro to the NYSE, it will be bad news for Brazilian exchange B3, which is trying to attract other Brazilian tech companies to list locally. That could then become a strategic issue for investors looking for onshore Brazilian investments.
Stephen Dover, head of equity for Franklin Templeton, says he believes Latin America is falling in relative importance in his firm’s emerging market investment allocation because of his firm’s focus on EM technology.
“There are not enough technology companies or innovative companies listed in Brazil,” he says. He adds that B3’s skew to commodity stocks is a problem for international investors because the exchange is not representative of the country’s real economy.
He says index funds do not match the potential upside to the country’s future economic growth, and that means that investors pursuing stock-picking strategies in certain sectors, such as consumer-orientated companies, face challenging valuations.
However, Dover does confirm the consensus view among Latin American equity capital markets bankers that the markets are very receptive to Latin American IPOs and political uncertainty in the region is not an obstacle. “We would absolutely look at IPO stories in the first half of this year,” he says. “We are long-term investor, and there is an IPO deficit in the region – there is a lot of catch-up that needs to be done in Latin America.”
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