Brazilian banks gear up for new wave of share offerings

The Ibovespa’s surge following the first round of Brazil’s election is prompting investment banks to step up preparations for a new wave of share offerings after a subdued year for the market. Market players began approaching clients last week and are now intensifying those conversations, encouraging companies to take advantage of higher share prices to raise capital, Valor has learned.

The benchmark Ibovespa stock index rose as much as 9.1% in the first hours of trading on Monday (Oct. 5) before closing 7.7% higher at 206,000 points. On Friday, ahead of the vote, the index had already gained 2.63% to 192,114 points. The latest jump brings its advance in 2026 to nearly 30%.

Banks are already making multiple presentations to potential clients about follow-on share offerings, which allow companies already listed on the exchange to sell additional stock, people familiar with the discussions said. The pitches are part of banks’ efforts to secure mandates for the transactions. The first deals could come to market soon if share prices hold up.

The prevailing view is that a broader reopening of the equity market is likely to begin with follow-ons because they can be structured more quickly. Beyond improved market conditions, some companies need to bolster cash reserves, reduce debt or repair their capital structures, potentially creating demand for primary offerings.

One source cautioned, however, that the market’s enthusiasm over a potential victory by Liberal Party (PL) candidate Flávio Bolsonaro, the eldest son of former President Jair Bolsonaro, still depends on the runoff result. A more lasting rise in Brazilian assets would also require macroeconomic measures and fiscal adjustments, an area where the outlook under a possible Flávio administration remains unclear.

Follow-on pipeline

The activity began before the vote, tracking the stock market’s gains in recent weeks, but gathered momentum after the first round. Banks are now assessing which companies could take advantage of the window and which transactions could reach the market quickly if conditions remain favorable. Investment bankers say there is a large backlog of deals waiting to come to market.

Brazil’s equity market has not been completely dormant in 2026, but a significant share of this year’s volume has come from transactions with specific characteristics that did not depend on a broader reopening.

Eight share offerings raised about R$22 billion in the first half, data from exchange operator B3 show. There have been no offerings in the past three months, however.

Special transactions

The largest deal of the year so far was the privatization of water and sanitation company Copasa, which raised R$8.38 billion in June. The transaction involved the state of Minas Gerais selling shares equivalent to 45% of the company’s capital. Because it was tied to the privatization process, the deal had its own dynamics and went ahead despite conditions that remained unfavorable for conventional share offerings.

Another large transaction with unusual characteristics was Engie’s R$8.36 billion offering in July. Of that amount, R$5.74 billion came from a subscription by its controlling shareholder through the contribution of its stake in the Jirau hydroelectric plant. About R$2.6 billion effectively came from market investors.

This year also saw Compass end a nearly five-year drought of initial public offerings on B3. The Cosan-controlled company raised R$3.2 billion in May through an entirely secondary offering, meaning the proceeds went to selling shareholders rather than the company itself.

The transaction was part of controlling shareholder Cosan’s strategy to reduce debt and strengthen its capital structure. While it formally ended Brazil’s IPO drought, banks view the deal as a special case rather than the beginning of a sustained flow of new listings.

Market reopening

Banks see the current activity differently. The expectation is that higher share prices could support offerings driven not by privatizations or specific corporate reorganizations but by an improvement in market conditions themselves. The need for some companies to rebuild their capital structures reinforces the view that follow-ons are likely to come first.

Because follow-on offerings involve listed companies with an established market price and regular relationships with investors, they can be prepared and executed much faster than an IPO. That allows banks and companies to take advantage even of relatively short market windows.

Historically, equity markets tend to reopen first with block trades, followed by follow-on offerings and eventually IPOs.

The activity is not limited to listed companies. Banks have also resumed work on potential IPOs, although the prevailing view among market executives is that a more sustained reopening of that market is likely to come only in 2027.

IPO preparations

February is emerging in discussions as one of the first possible windows. By then, there should be greater clarity over the political and economic environment after the election and whether the rally in Brazilian assets can be sustained. IPOs also require longer preparation and greater market visibility.

Banks are therefore moving ahead with the necessary groundwork so companies will be ready if a window opens. The process includes documentation, governance arrangements, corporate structures and preliminary contacts with investors.

Bankers describe the strategy as preserving optionality: preparing a transaction without committing in advance to carrying it out.

One example is Brasil Terrenos, a residential land-development company. The company has confidentially applied to register as a Category A publicly held company with the Securities and Exchange Commission of Brazil (CVM), sources said. That status allows it to issue shares and puts the company in a position to move forward with a potential offering.

The application does not mean Brasil Terrenos has decided to pursue an IPO. Rather, the aim is to have the company ready to access the market if favorable conditions emerge after the election, people familiar with the matter said.

U.S. listings

While a broader revival of IPOs in Brazil is viewed as a possibility for next year, two Brazilian companies have already moved ahead with preparations for U.S. offerings, a route that some businesses are likely to pursue.

Payments company Elo and Wellhub, formerly Gympass, have made initial confidential submissions to the U.S. Securities and Exchange Commission (SEC), sources said.

Confidential filing allows companies to begin the SEC review process without publicly disclosing preparations for an offering. It does not mean the IPOs will necessarily go ahead and gives the companies the option of deciding later whether to proceed, depending on market conditions.

Elo had already hired banks to work on a potential U.S. listing. The company is owned by Banco do Brasil, Bradesco and Caixa Econômica Federal. Wellhub has also been preparing for a possible U.S. market debut.

Asked for comment, Elo said it does not comment on market rumors. The company added that “in the normal course of its business and in line with its growth strategy and optimization of its capital structure, it continuously evaluates strategic alternatives and opportunities in the capital markets.”

The other companies mentioned declined to comment.

*By Fernanda Guimarães — São Paulo

Source: Valor International

https://valorinternational.globo.com/