Will Nubank close in Brazil? understand the changes

Nubank drew the attention of the financial market by announcing, last week, a change in its BDRs (Brazilian Depositary Receipt) program, a receipt traded on the Brazilian Stock Exchange that tracks the variation of shares listed on the New York Stock Exchange (NYSE), in United States.

In practice, the board of directors approved the start of a process for Nubank to close its capital on the Brazilian stock exchange. The bank’s BDRs will continue to be traded on the Brazilian stock exchange, but they will change from level 3 to level 1, which is the type issued by companies registered abroad.

With this change, Nubank will no longer need to follow rules established by the CVM (Securities and Exchange Commission), a regulatory body for the Brazilian financial market, but will continue to respond to the requirements of the SEC (Securities and Exchange Commission), which regulates the market in the United States.

Customers began to ask on the internet if Nubank went bankrupt or if it will close in Brazil and what could happen to their accounts.

The fintech clarified, however, that the termination of its operations in the local market is not a possibility considered. According to Nubank, nothing changes for the customer who uses the bank’s services.

“Nubank will not close in Brazil. The announcement is just the restructuring of the BDRs program. We continue to work to increasingly simplify the financial life of our more than 60 million customers”, said the fintech in the statement released on Thursday. (15).

The company will also continue with the disclosure in Portuguese of documents intended for investors, such as the presentation of quarterly results.

Understand what changes for those who invested in the bank’s BDRs

When the change is implemented, investors who hold BDRs of the company will have the option to receive class A common shares traded on the New York Stock Exchange, at the rate of 6 BDRs for each share. Therefore, to opt for this alternative, the investor must have a minimum of 6 BDRs.

Another option is to exchange tier 3 BDRs for tier 1 securities on a one-to-one basis. Nubank investors on the Brazilian stock exchange may also choose to sell their securities.

Nubank said investor options will appear on the fintech app over the next few months.

At the end of last year, in the midst of the process of going public on the United States Stock Exchange, Nubank created the NuSócios program, to invite its clients to become partners in the company –”at no cost”, according to the company- through receipt of one BDR per person.

According to the company, about 7.5 million people have accepted to receive the BDR through the program, on the condition that they can only be sold on the market after 12 months, in December 2022.

In last week’s statement, the fintech said that “along with other investors in BDRs, NuParties will also be able to choose between converting or selling their BDRs, before the end of the specific lockup period. [prazo em que a venda não é autorizada] from the program.”

Since going public in December 2021, Nubank’s shares have plummeted by around 41.5%, in a scenario of rising interest rates in developed markets that has led to growing questioning on the part of investors about the capacity of new companies from becoming profitable in the coming years.

Analysts consider negative change to company transparency

Market analysts did not receive the news very well.

Nubank’s decision to cease being a publicly traded company in Brazil is negative for the company’s governance and for minority investors, as it reduces the level of transparency of fintech operations, according to analysts Pedro Leduc, Mateus Raffaelli and William Barranjard. , from Itaú BBA.

“In practice, we believe that information disclosure may become poorer, and even less comparable with local financial institutions,” the analysts said in a report.

Itaú BBA analysts add that Nubank cited a reduction in the complexity related to the disclosure of reports imposed by Brazilian market legislation to make the decision.

“However, the cost benefits of not having to comply with this requirement have not been quantified by the company,” the experts point out.

For Nord Research analyst Danielle Lopes, Nubank did not mention the main reason for the announced decision.

“The company has not been able to present good results and needs to be accountable to investors and shareholders. With the increase in default and all the media on top of the bad numbers, even Nubank customers are considering closing their bank accounts. confidence from all sides,” Danielle said in a report.

The change in the BDRs program, said the expert, allows Nubank more flexibility, which is less exposed to CVM rules in terms of accountability, which should leave fintech further away from the spotlight.

“If Nubank does not have a positive image in the media, the client who uses the current account, perhaps, may have the view that the reasons go beyond the results, and understand that the business is deteriorating”, says the analyst. from Nord, adding that this perception of fintech could lead to a migration of account holders to another digital account, causing the bank to massively lose the volume of new customers it attracts.