Nubank goes private in Brazil and maintains shares in the US

Nubank reported on Thursday night (15) that it intends to cease being a publicly traded company in Brazil to continue registered only on the New York Stock Exchange. In practice, the company’s BDRs, acronym for Brazilian Depositary Receipts, are still present on the B3, the Brazilian Stock Exchange, but now follow the rules of the American market.

Technically, the company’s board of directors has approved the start of a process to discontinue its level III BDRs program at B3 to move to level I receipts. Nubank’s plan will be submitted to B3 for approval.

In general terms, the BDR is a receipt traded on a stock exchange backed by shares listed abroad.

The difference is that the current papers comply with both the CVM (Securities and Exchange Commission) rules and the SEC (Securities and Exchange Commission), the federal regulatory body of the American market.

For analyst Carlos Herrera, chief strategist at Condor Insider, the SEC’s rules for controlling and monitoring the company that issues the shares are less strict than the Brazilian ones. “That will be the main difference for the investor,” he commented.

The measure comes after the co-founder and chief executive of the digital bank, David Vélez, expressed dissatisfaction with the view of analysts of financial institutions in Brazil regarding Nubank’s shares.

In an interview with Reuters last week, Vélez said that some analysts in Brazil seem to expect a more immediate higher profitability from Nubank, but that there are steps to be taken before his thesis is confirmed.

Of the 17 analysis houses that follow Nubank’s action, according to Refinitiv data, three have an ‘underperform’ recommendation, all of them in Brazil (Itaú BBA, Bradesco and Santander). BTG Pactual has a net recommendation.

The announcement also comes in the wake of regulatory and technological innovations, which have made it easier for retail investors from Brazil to trade directly on foreign exchanges.

What changes for those who have a Nubank BDR

Once implemented, the operation will give the company’s BDR owners the option to receive class A common shares traded on the New York Stock Exchange, in the proportion of 6 BDRs for each share, therefore, to opt for this alternative, the investor must have a minimum of 6 BDRs.

Another option will be to exchange Tier III BDRs for Tier I securities on a one-to-one basis. Finally, Nubank investors in B3 will be able to sell their shares.

The BDR is an exchange-traded receipt backed by shares listed abroad. At level III, there is a need to register the company with the CVM and public offering of the assets, which does not occur in level I.

In a material fact, the company stated that the proposal aims to “maximize the efficiency and minimize the consequent redundancies of a publicly-held company in more than one jurisdiction”. In addition, Nubank said the decision does not affect the group’s long-term commitment to Brazil.

with Reuters