Latin America IPO values decline in 2018

Latin America saw a slight decrease in the value of initial public offerings (IPOs) and a significant drop in volume in 2018, with only 11 domestic IPOs taking place, totalling $8.9 billion, a decline of 2 per cent in value and 39 per cent in volume compared with 2017, according to research by law firm Baker McKenzie.

In 2017, domestic IPO activity in Latin America reached $9 billion across 18 public offerings. The law firm partially attributed this year’s drop to a number of countries holding general elections, such as Brazil and Mexico.

This year’s listings include three mega deals: Empresa Brasileira de Infraestrutura Aeroportuaria (Infraero), set to raise $3.6 billion; Grupo Aeroportuario de la Ciudad de Mexico, which raised $1.8 billion on the Mexican stock exchange in March; and Hapvida Participações e Investimentos, which raised $1.1 billion on Brazil’s B3 stock exchange in April.

Unlike last year however, there were no cross-border listings in the region in 2018.

“As expected, regional elections have impacted IPO activity, with at least 10 presidential elections or changes in government in 2018 alone, including in larger countries such as Colombia, Mexico, Chile and Brazil,” according to Pablo Berckholtz, head of Baker McKenzie’s Capital Markets practice for Latin America.

“We can expect this effect to linger for another six to 12 months. We do, however, have high expectations for the performance of Argentina in 2019, once the country’s economic reforms go into effect.”

Globally, the total value of this year’s IPO activity has surged to a four-year high of $219.4 billion, with high-value megadeals having compensated for a slower year in deal volume compared to last year, the law firm said. 

Following 2017’s ten-year high of 1,739 IPOs, there have been 1,448 deals so far in 2018, a 17 per cent drop in volume. This fall has been offset, however, by the 5 per cent increase in IPO value to $219.4 billion, boosted by Tencent Music’s $1.2 billion New York listing and SoftBank’s record $21.1 billion Tokyo listing, both expected later this month.

“It’s been another year of strong geopolitical headwinds – protectionism, Brexit and general uncertainty caused by elections around the world – all of which have done little to dampen capital market activity amongst certain issuers,” Koen Vanhaerents, Baker McKenzie’s global head of capital markets, said.

“In particular, we’ve seen an increase in cross-border IPO value in 2018, largely as a result of an increase in listings and capital raising by Chinese companies tapping deep investor pools in Hong Kong and the US. While domestic listings were down slightly from where we expected them to be, we expect an uptick in 2019 as new governments settle and certainty increases once more.”