The shares of the reinsurer IRB operate in sharp drop this Tuesday (30) on the Stock Exchange, on the eve of the closing of the stock offering – the company that seeks to reframe regulatory indicators.
At around 12:30 pm, the reinsurer’s shares fell by around 5.4%, trading at R$ 1.76, which represented the biggest drop of the day on the B3, and renewed the historic lows of the shares.
Year-to-date, the losses of IRB shares on the stock exchange have reached 56%.
Understand why IRB stock is plummeting
The recent selling pressure (a large number of investors trying to sell the share, which brings its price down) comes in the wake of an announcement made by the company on August 24th, that it will carry out an offering of shares in which it intends to raise about R$1 .2 billion, with the objective of meeting minimum regulatory capital requirements to operate in the sector.
The IRB will initially offer up to 597 million shares to the market, in an operation restricted to qualified investors (with more than BRL 1 million in financial investments) or professionals (with more than BRL 10 million). Investors who are already shareholders of the IRB may also participate, so as not to suffer a strong dilution of the positions held.
Considering the closing on August 24, at R$ 2.01, the amount of shares initially offered would be enough to reach the stipulated value of R$ 1.2 billion.
The reinsurer informed, however, that the amount of shares to be offered can be increased by up to 200%, or almost 1.2 billion shares, totaling an offer of approximately 1.8 billion shares, in case there is excess demand for the shares. securities, according to the offering’s prospectus.
“If the IRB ends up issuing the maximum number of shares allowed, in order to reach BRL 1.2 billion, we would be talking about a price of BRL 0.66”, BTG Pactual analysts point out in a report.
Since making the announcement of the offer, IRB shares have already lost about 12.5%, with investors betting that the fundraising will not be enough to get the reinsurer back on track.
What does the operation known as ‘sold’ mean, which made the IRB fall
The bet on the fall takes place through an operation known in market jargon as “short”, in which the investor rents the share he expects to fall from an investor who holds the shares, with the expectation that the share back off and it rebuys at a lower value to return it later.
Rodrigo Crespi, an analyst at Guide Investimentos, recalls that there is a limitation in the local market for the volume of shares “sold” in the market of 25% of the total shares outstanding in the market.
With the high demand for renting IRB shares, B3 temporarily increased this limit to 30%, corresponding to around 377 million shares, notes the expert.
“There has been a substantial increase in IRB shares sold since July, reaching 333 million shares in the last few days. Rent rates have also increased, reaching about 48% per year,” the Guide analyst said in a report.
BTG analysts also point out that the bookbuilding process, in which the coordinating banks collect investor demand for the shares offered to define the price per share, is scheduled to end on September 1, next Thursday.
Bradesco BBI, Itaú BBA and Santander are the coordinating banks, with the first two holding shares of 15.8% and 11.5% in IRB, respectively.
IRB faces investor disbelief since late 2019
The IRB made its debut on the stock exchange via an initial public offering (IPO) in July 2017, and for some time was considered one of the “darlings” of investors.
At the end of 2019, however, the company was accused by the asset manager Squadra of making up the numbers in the quarterly earnings reports, in order to present a better picture of what was, in fact, its real situation.
In addition, the company was also accused of disclosing false information about an investment that never existed by the American mega-investor Warren Buffett, causing its shares to have entered a negative spiral from which they have not yet been able to get out.
In the second quarter, the reinsurer reported a net loss of R$ 373.3 million, which corresponded to an increase of 80.4% compared to the loss recorded a year earlier, with the numbers giving rise to non-compliance with regulatory indicators that forced the company to announce the current share offering.
“We remain cautious with IRB actions,” say BTG analysts.
with Reuters
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