Only 13% of companies that have gone public since 2015 beat the market

​Of the wave of companies that went public (IPO) on the Brazilian Stock Exchange in recent years, the vast majority have not been able to deliver above-market-average returns to investors.

A survey by the TradeMap financial data platform shows that, of the 85 companies that went public on the B3 since 2015, only 11, or 13% of the total, managed to outperform the Ibovespa index and the CDI.

The analysis comprises the period between the IPO of each company and July 15, 2022, and does not consider companies that went private, were incorporated or merged with others during this period.

In the group of stocks that managed to outperform the market benchmarks, car rental companies Movida and Vamos stood out ahead of the others, with profitability of 90.50% and 70.31% since the IPO, respectively.

“Both in the rental sector, one focused on trucks and machines and the other for light vehicles, these companies appreciated in the midst of the pandemic, when the lack of semiconductors caused vehicle prices to increase, causing both the appreciation of fleets and the increased demand for equipment rental”, says Sergio Castro, an analyst with CNPI certification at TradeMap.

Amid the rise in oil prices on the international market with the resumption of economic activity on a global scale after the most acute phase of the pandemic, and, more recently, due to the Ukrainian War, oil companies PetroReconcavo and 3R Petroleum also stood out with performance above the market average over the last few months.

“Understanding the financial and political context in which the company is inserted before investing resources in an IPO can make the difference to minimize risks and maximize opportunities”, says Castro.

Retailers and real estate companies appear among the biggest drops since their debut on the Stock Exchange

Among the companies with the biggest drops since going public, the retail sector is one of the main highlights, having a performance well below the Ibovespa index, which was driven by the strong rise in the price of commodities in the international market.

C&A shares, for example, have accumulated a fall of around 85% since the IPO in October 2019, against the Ibovespa’s 10% losses in the same period, while those of the e-commerce platform Enjoei have sunk 88% since its debut on the stock exchange, in November 2020, against the 4.3% drop in the stock index.

The shares of the Burger King chain, a recent target of an onslaught by the Arab fund Mubadala, have fallen 65.8% since its IPO in December 2017. The Ibovespa has risen 33% in the same period.

Coordinator of the Center for Studies in Finance at FGV EAESP (São Paulo Business Administration School of Fundação Getulio Vargas), Claudia Yoshinaga says that, in a scenario of low economic growth, with inflationary pressure and rising interest rates, companies focused on consumption and retail of non-essential goods end up being among the most affected at the time of purchase.

“We had a loss of the population’s purchasing power. Although the unemployment rate has been decreasing, the big question is that the income people are receiving has been reduced a lot. They are employed, but, in many cases, with wages lower than they received in the past”, says the teacher.

She adds that the strong entry of individual investors on the stock exchange over the last few years at low interest rates also helps to explain the sharp drops in rookie stocks, as this public, even less familiar with the stock market, may have been scared. with sudden price changes and sold at a time when stocks were falling.

“In addition, rookie stocks tend to have less liquidity, which ends up forcing investors to have to sell at a greater discount to be able to find buyers and thus get rid of the paper”, says the expert.

Sensitive to the increase in interest rates and real estate financing, newcomers to the Stock Exchange are also among those that have suffered the most since their debut – Plano and Plano shares have fallen 73.1% since the IPO, in September 2020, while the Ibovespa drops 3.1%. Miter Realty, on the other hand, sees its shares devaluation of 74.7% after the IPO in February 2020, compared to the 16.4% drop in the stock index.

The reinsurance company IRB Brasil, which faced particular problems due to false information disclosed by the company about an investment by American mega-investor Warren Buffett, also appears among the biggest drops since the IPO – the company’s shares fall 71.7% in the range of July 2017 to July 2022, against a 47.4% rise in the Ibovespa in the same range.

Inverse relationship between number of offers and stock performance

Guide Investimentos analysts also point out that the high number of offers in recent years, especially in 2020 and 2021, contributes to low returns for new stocks on the Stock Exchange.

“Among so many offers, the quality of the companies presented a greater variation, with companies that had not even made a profit at the time, and, for the most part, at prices above what was later considered as fair by the market, being an example of typical behavior moments of euphoria”, point out analysts Fernando Siqueira, Rodrigo Crespi and Gabriel Gracia, in a report on the recent wave of IPOs in the local market.

According to the experts at Guide, “there is a clear inverse relationship between the number of offers and the performance of these offers in the market. Years with many offers usually generate worse results in the future.”

CBA, Movida, Intelbras and 3R Petroleum are among the companies that made their IPO on the stock exchange in recent years with discounted shares that brokerage analysts believe offer good opportunities to investors. They are businesses that “have quality and are inserted in sectors with the potential to grow more than GDP”.