IPO markets surged
The equity offerings market in Argentina touched a 3-year high in 2017 with 17 new deals (IPOs, FPOs and private placements) announced.
New share offerings had been slow to take off since President Mauricio Macri took office in 2015 with just 9 offerings in 2015 and 2016. This includes 2 international IPOs in the United States and one locally listed IPO. The rest in this period were all follow-on offerings.
Even though the Argentinean benchmark Merval Index nearly doubled since Macri took over, Argentina’s stock market has failed to attract IPOs, as valuations have remained low compared to other emerging markets. MSCI’s decision to decline emerging market status to the country also acted as a deterrent to investments in local stock markets.
Since 2015, the Global X Argentina ETF (ARGT) is up 71% while the MSCI Argentina Index has gained 81%. In comparison, the Merval Index has surged 223% during the same period.
President Macri’s reformist policies aimed to open up the economy have gained much appreciation from the international investor community. The country’s inflation target of 12-15% by end of 2017 seems achievable and GDP has grown by 0.7% in Q217. Consumer confidence has also rebounded, driving equity markets to fresh highs.
Daniel Patron Costas, head of investment banking at Banco Santander Rio SA, expects Argentina’s IPO markets to pick up in 2018 as valuations begin to rise. “Issuers are looking to see if their valuations are the highest they can be,” he said in an interview to Bloomberg. “The IPO boom might not be in 2017, but 2018 should be the key year,” said Costas.
According to Bloomberg, nearly 17 offerings (including primary and second issues) have been announced in 2017 so far, with an aggregate deal value of $7.1 billion. Of these, nearly 59% of IPOs were from the financial sector, while telecommunication and industrial companies made up 23% and 12% of IPOs.
Is the tide turning for Argentina’s IPOs?
Over the next 18 months, Santander expects nearly 6 international IPOs, primarily in the energy, infrastructure and agribusiness sectors.
There are several large IPOs already in the pipeline to be listed in 2017. These include Loma Negra, Genneia, Cañuelas Mill, Central Puerto, Corporacion America and TGLT. Technology companies dominate the list of IPOs after the successful listings by Despegar, Globant and MercadoLibre earlier this year.
Upcoming IPOs To Look Out For
Argentina’s equity markets have picked up in 2017 with 17 offerings (including IPOs, private placements and FPOs) in 2017 so far, and around 6 companies slated to list abroad over the next six months. As per Bloomberg, five companies alone may raise up to $2.8 billion. This is the highest number of IPOs since 2007 when four Argentinean stocks raised $1.6 billion. Large companies like Loma Negra, Molino Canuelas Sacifia, and TGLT are seeking listings in the United States.
- Loma Negra Cia Industrial Argentina – Cement maker Loma Negta plans to raise $800 million in a dual listing in New York and Argentina. The company will offer $50 million ADRs with each ADRs representing five common equity shares of the company. The shares will be priced at a range of $15-$19. The IPO was filed in September 2017, and will get priced on October 31. Proceeds from the IPO will be used to fund the expansion of Loma’s L’Amali plant in the Buenos Aires region.
- Molino Canuelas SACIFIA – Leading flour and oil producer Molino Canuelas aims to raise $100 million in a public listing on the New York Stock Exchange. The company filed for an IPO in September 2017 and has selected Itau BBA, JPMorgan, and UBS as book runners for the offer. Molino Canuelas seeks a dual listing in New York as well as Argentina. Details of the IPO are yet to be announced.
- TGLT – TGLT aims to raise $50 million in a public issue on the New York Stock Exchange. The company filed its IPO in in June 2016 with the SEC. Leading investment banks JP Morgan, Morgan Stanley, Santander and UBS are underwriters to the IPO. Pricing details are still to be announced. The company’s shares have been trading on the Argentinean stock exchange since November 2010 and are up 84% since debut.
Historical performance of Argentina IPOs under Macri
Since 2015, Argentina’s companies announced merely 13 IPOs (primary offerings), of which 6 were announced in 2017.
- Despegar.com, (DESP)(D3G.F) Latin America’s leading online travel agency raised $381 million in a public listing on the New York Stock Exchange in September 2017, making it the largest IPO under Macri’s Presidency. Despegar.com offered 12.8 million shares priced at $26, the high-end of the offering range of $23-$26. Despegar.com, which sells airline tickets, travel packages and hotels in 20 countries around the region, was valued at almost $2 billion after its successful IPO. The IPO was 13.4x oversubscribed and the stock hit a high of $31.50 on its first day of trade. Prior to the IPO, leading travel portal Expedia owned 16.4% of Despegar that it bought in 2015, while US Hedge fund Tiger Global Management owned 57.3% stake. Offer to date, shares of the company have appreciated 15.4%.
- Grupo Supervielle’s (SUPV.BA)(SUPV) raised $301 million IPO in June 2016 in a dual Listing in New York and Argentina. The company’s ADRs have returned 132% to date since then, while its Argentina listed shares have returned 135%. Grupo Superveille was the first Argentinean company to get listed abroad since 2010, signaling a turn in investor sentiment. The company’s ADRs were offered at $11-$13 while its common shares were available in Argentina for $2.20-$2.60.
- Havanna Holding (HAVA.BA), an Argentina based confectioner raised $11.5 million in a public listing in June 2016. The company issued 4.27 million shares, equating to 10 percent of the company at 37 pesos per share, valuing the company at around $114.7 million. The IPO was 2x oversubscribed, with 17% of applications coming from foreign investors. Havanna’s offering was the first solely local equity offering since the Petrolera Pampa’s IPO in 2013. Since the offer, shares of the company have declined 4%.