Jéssica Chaves Costa
Lawyer at Marcos Martins Advogados
IPO (Initial Public Offering), also known in Brazil as Oferta Pública de Emissão (Public Offering), is the process in which a company issues a batch of shares or other securities for trading on the market, either through the stock exchange or the over-the-counter market, and can also occur through an offering with restricted efforts, when the issue is made to qualified investors.
The main purpose of an IPO is for the company to raise external funds to make investments. With extra capital from investors, companies can open up a range of new paths and possibilities, and can take the business to another level in terms of generating results.
However, in order to issue shares or other securities, a company cannot simply approach investors directly. It will be necessary to register as a publicly traded company with the regulatory body, which in Brazil’s case is the Securities and Exchange Commission (CVM), in addition to authorization to issue and auction. It is important to note that the process of going public can simply culminate in the registration of the issuing company without the actual issue.
Right from the start of the process, the Offer Prospectus, aimed at the investing public, should be attached, detailing important information about the operation itself, business risks and management plans, so that any investors are aware of the company’s financial conditions before any acquisition.
In addition, when going public, the company must comply with a series of transparency and accountability rules for the market and regulatory bodies.
Once the entire process has been completed, the company can finally make its debut on the capital market with its IPO. In 2021, for example, according to the newspaper Valor Econômico¹ , IPO operations by Brazilian companies have already raised US$ 1.44 billion and the total volume is expected to be much higher by the end of the year, potentially hitting US$ 5.8 billion in deals, led by the technology sector.
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FILGUEIRAS, Maria Luíza. Brazilian companies have record IPOs on American stock exchanges. Valor Econômico newspaper, 2021. Available at: https://valor.globo.com/financas/noticia/2021/08/17/brasileiras-tem-recorde-de-ipos-nas-bolsas-americanas.ghtml Accessed on Aug. 26, 2021.
