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Brazil's B3 targets potential XP listing in push to inspire more local IPOs

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Brazil's B3 targets potential XP listing in push to inspire more local IPOs

Brazilian stock exchange operator B3 SA - Brasil Bolsa Balcão is exploring ways to attract listings from local companies, which took more than $5 billion of equity offerings to New York in 2018, Bloomberg News reported.

"We are working with the regulator CVM to make some rules more flexible, and they are very sensitive to what we call an exportation of the market," B3 CEO Gilson Finkelsztain said in an interview with Bloomberg.

The push follows a number of Brazilian companies deciding to list in New York last year. Two examples include financial technology firms PagSeguro Digital Ltd. and StoneCo Ltd., both of which made their market debut in New York.

Finkelsztain said he is working with authorities to foster "a more friendly environment" that would allow Brazilian firms listed in New York to also trade on the local markets. "So local funds wouldn't need to buy dollars and go to U.S. markets to buy shares from those local companies," the executive said.

Companies also receive tax incentives to establish their domicile outside of Brazil, which is another issue "that needs attention," he added.

B3 is also contemplating "confidential filings" for smaller companies to further raise the appeal of local IPOs. These transactions would allow companies to pull out of a planned offering without suffering potential reputational damage.

Local companies domiciled abroad that source more than 50% of their revenue from Brazil are not permitted to issue BDRs, the Brazilian equivalent of American Depositary Receipts. Finkelsztain said a possible solution would be to allow such firms to simultaneously list in Brazil.

As B3 works with regulators to ease certain rules, Finkelsztain has a close eye on one particular company. XP Investimentos SA, Brazil's largest brokerage for middle-class investors, is reportedly looking to list shares on the Nasdaq stock exchange, although an official announcement has not been made yet.

"We are going to do everything for XP to list itself here in Brazil and not in New York; our commercial team and myself personally are going to fight for that," Finkelsztain said. "XP is a flagship, a huge success story that proved there's space for an independent brokerage firm in Brazil. It should list itself here."

The CEO told Bloomberg that he expects B3 to see 20 to 30 equity deals in 2019, beginning in March.