Companies turn to “reverse IPOs” to gain stock exchange access

These targets are often small-cap companies with very low trading volumes. Many of them went public during the IPO boom at the height of the pandemic but have since become minor players in the market, with little prospect of regaining relevance among investors.

Valor has learned that some of these listed companies are working with investment banks to signal their openness to being acquired for a reverse IPO. One such candidate is Westwing, a home décor e-commerce company currently valued at R$58 million on the B3.

People familiar with upcoming deals said the next reverse IPO may involve Oranje, a newly launched bitcoin treasury operation that acquired Intergraus, a college prep course provider, from Bioma. The deal, announced in May, was conditional on Intergraus registering as a public company and being listed on the B3. Last week, Oranje confirmed its intention to carry out a reverse IPO in October.

Another case is real estate developer BRZ, which had been pursuing a traditional IPO for years but ultimately opted to merge with Fica, a listed company in the same sector that has long been forgotten by the market.

Reag, a fund manager recently caught up in the “Hidden Carbon” police operation, also executed a controversial acquisition when it took over Getninjas, a services marketplace. Sources who requested anonymity said Getninjas had attracted interest from other companies looking to list via a reverse IPO. The appeal, in that case, was that the company had more cash on hand than its market cap, due to a steep decline in its share price.

An investment banking executive specializing in equities said several companies are exploring this route, although the cases remain isolated. He noted that any buyer would likely need to carry out a follow-on share offering once market conditions improve to restore liquidity.

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BRZ’s Chief Financial Officer and Head of Investor Relations Fabiano Valese said the lack of visibility on when the IPO market might reopen weighed heavily on the decision. He also pointed to synergies with Fica’s landbank. “This move shortens our path to becoming a listed company, and we’ll have a significant landbank,” he said.

Mr. Valese recalled that BRZ maintained internal plans for an IPO even after the initial attempt was derailed by rising volatility and interest rates. The company already operates day to day as if it were publicly traded, he said. More recently, BRZ began holding talks with investors. The merger with Fica is expected to close in the coming months, which will mark BRZ’s official debut on the B3.

Conrado Stievani, a partner in capital markets at law firm BMA, said his office has received inquiries about reverse IPOs. He noted that some companies are doing the math to decide whether to buy a listed company and carry out a future follow-on, or simply wait for IPO windows to reopen.

“There are companies looking at this option,” Mr. Stievani said, but he emphasized that any company pursuing this path must prepare for the operational complexities and due diligence involved in such acquisitions.

Henrique Ferreira Antunes, a capital markets partner at law firm Mattos Filho, said some buyers are also eyeing reverse IPOs as a way to make use of tax losses accumulated by the target company. “But they must consider any hidden liabilities tied to that corporate registration,” he warned.

Another issue, Mr. Antunes noted, is the post-transaction challenge of repositioning the company under a new brand. This typically involves an “educational” effort and “non-deal roadshows”—investor meetings not tied to a specific transaction.

Mr. Antunes also stressed that any firm going public via a reverse IPO must be ready for life as a listed company, which includes regular earnings reports and constant market communication.

Gustavo Rugani, a partner at law firm Machado Meyer, said that in practical terms, a reverse IPO is essentially a merger and acquisition deal between a private company and a public one. “And in a market like this, where conditions are unfavorable for traditional IPOs, it works as a shortcut,” he said. “It’s about seizing the moment. In 20 years working in this field, I’ve never seen such a long dry spell for IPOs.”

Contacted by Valor, Westwing said it is currently focused on profitability and growth, and that “a reverse IPO is not in the company’s short-term plans.”

Oranje said it would limit its comments to the material fact disclosure already made to the market. In it, the company said the acquisition of Intergraus “is aligned with its strategy of building an educational platform based on non-degree courses” and that Intergraus “has a strong brand and valuable intangible assets that will support growth” in its operating markets.