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Last Trade - 07/05/21

Sector
Telecoms
Size
Large Cap
Market Cap £34.78bn
Enterprise Value £59.35bn
Revenue £36.50bn
Position in Universe 258th / 6858

Brazil's IPOs lose steam amid virus surge, political turmoil

Wed 14th April, 2021 5:26pm
By Carolina Mandl
    SAO PAULO, April 14 (Reuters) - Brazil's massive pipeline of
companies seeking a market flotation is suffering a blockage of
sorts as investors start to balk at some deals, spooked by the
country's snowballing pandemic and political turmoil.
    As a result, some companies have been forced to re-size,
push back and even scrap their planned initial public offerings.
    In the last two weeks, for example, medical lab Diagnostico
da America SA  DASA3.SA  and electronics distributor Allied
Tecnologia SA  ALLD3.SA  both cut their respective price ranges
to conclude the deals. Pharmaceutical company Blau, meanwhile,
reduced the size of its planned offering and software firm LG,
bank BV and Viveo, a distributor of health products, cancelled
their planned IPOs altogether, at least for now. Hospital chain
Mater Dei is trying to price the deal on Wednesday after
reducing its price range.  urn:newsml:reuters.com:*:nL1N2M00UY  urn:newsml:reuters.com:*:nL1N2M703M 
    Roderick Greenlees, head of investment banking at Itau BBA,
said that of the 40 companies that originally planned IPOs for
April and May, only about half will likely come to fruition. 
Still, 11 companies plan to price IPOs in the coming weeks,
according to regulatory filings.
    "The market has improved after hitting a low about two weeks
ago," he said, adding that new deals have been launched over the
last week.
    Last year was Brazil's busiest in 13 years for share
offerings, with 60 IPOs and follow-ons, and bankers had been
prepping for an even more active 2021.
    Companies in more resilient sectors such as healthcare,
technology and finance tend to conclude deals, said Alessandro
Zema, Morgan Stanley's head of Brazil. But even these companies
have found resistance.
    
    JOLTS TO MARKET SENTIMENT
    Brazilian President Jair Bolsonaro surprised investors in
February by firing the CEO of state-controlled oil company
Petrobras  PETR4.SA  in retaliation for a series of fuel price
hikes. Later, in another blow to market sentiment, Banco do
Brasil SA's  BBAS3.SA  CEO resigned after Bolsonaro criticized
his cost-cutting plan.
    Adding pressure on the political front, the Senate is
preparing to install a special committee to investigate how the
government has dealt with the pandemic.
    A 5 billion-reais ($879.9 million) IPO by state-controlled
insurance company Caixa Seguridade scheduled for April 27 will
test whether Brazil's government can still lure investors.  
    Brazil is suffering the world's second-deadliest coronavirus
outbreak and vaccinations are moving slowly  urn:newsml:reuters.com:*:nL4N2AY3AS
 urn:newsml:reuters.com:*:nL8N2L72PX, undermining confidence in the government's
official GDP growth forecast of 3.2%, an estimate commonly used
by investors in their calculations to set a companies
valuations.
    (Interactive graphic tracking global spread of coronavirus:
open https://tmsnrt.rs/2FThSv7 in an external browser.)
    Foreign investors' appetite for IPOs has diminished, a
private equity manager who is planning to list a portfolio
company told Reuters, and this is forcing companies to rely
heavily on domestic fund managers. Many local investors are
migrating from fixed income to equities as Brazil's interest
rates are in the low single digits, although this move slowed
this year.
    In February and March, there was a net outflow of 8.5
billion reais from Brazil's B3 stock exchange, although there
remains a positive balance of 17 billion reais for the year so
far. Brazil's stock index, Bovespa  .BVSP , is nearly flat this
year, underperforming U.S. indexes, where capital markets
activity is booming with vaccination rollouts.   
    "Only a higher speed of vaccination would be able to lead to
a speedier economic recovery, thus favoring the outlook for
deals," said Morgan Stanley's Zema.
 ($1 = 5.6826 reais)

 (Reporting by Carolina Mandl in Sao Paulo; Editing by Christian
Plumb and Matthew Lewis)
 ((carolina.mandl@thomsonreuters.com; +55 11 5644 7703; +55 11
97116-3806;))
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