The Brazilian stock market's battle to retain its startups
The Brazilian stock market's battle to retain its startups
Competing with the US's finger-licking valuations and liquidity, Brazil's bourse is doing what it can to get the country's tech champions to list locally.
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A new economic organ
The recent emergence of startups worldwide has rattled many countries’ economies, previously used to the dominance of incumbent financial, telco, and commodity-based behemoths. The arising of insolent tech companies vowing to disrupt entire industries is increasingly recognized as the evident next step in the world’s economic makeup.
The creation of this new “economic organ” if you will is accompanied by an additional difficulty: these startups, powered by exit-seeking venture capitalists, have dreams often way bigger than the countries they are based in. The final step of these startups’ fundraising cycle, the IPO, is thus often more attractive abroad, the United States to be more precise.
However, the expatriation of these new economic champions doesn’t fare well for the host country. Their local stock market doesn’t benefit from their success, and local investors have a harder time gaining a stake in what constitutes a significant part of their country’s economic future.
This thorny issue is known by governments and stock markets worldwide, who are increasingly finding ways for local champions to go public at home. Euronext, the largest pan-European bourse, has instated programs such as the pre-IPO Techshare program to lure the most promising European scaleups into their dominion. In Southeast Asia, tech giant GoTo made waves when it listed on IDX, the Indonesia stock exchange, raising $1.1B in the process. Its impact on the local economy can’t be understated:
“By the day’s end, GoTo’s market capitalization was US$32 billion and saw some 300,000 investors participate in the IPO, a record high for the domestic bourse. Further, GoTo became Indonesia’s fourth-largest company, behind two banks and a state-owned telecommunication firm. The company has plans for an international IPO although the exact timeline has not been made clear yet.” - ASEAN Briefing
The GoTo story, which I deep dive into in this piece, is a testament to how tech startups are fundamentally reshaping economies worldwide. Nowhere is this transformation more visible than in Brazil.
The Brazilian case
The Brazilian tech scene has fascinated me for a while now, leading me to write pieces on its startup ecosystem, its central bank, and Nubank’s IPO. Brazil’s demographic powerhouse, complemented by the population’s intense use of technology and its government’s proactive stature on innovation, makes it a place where the economic transformation I describe above is potent.
Brazil was a protagonist in the startup funding bonanza that swept the world off its feet in 2021. That year was nothing short of exceptional for the Brazilian ecosystem: 9 new unicorns, $10B invested (194% jump from 2020), and a whopping 760 funding rounds. The post-pandemic year rebound cemented Brazil as the LATAM startup scene’s undisputed boss.
This immense growth inevitably created new IPO candidates, now faced with the draconian choice of either listing on the Brazilian stock market, B3, or on one of the two American options, the NASDAQ or the NYSE. Or maybe they could list on both?