The story of Latin American IPO activity in 2020 is similar to the global narrative—just far more pronounced and focused almost exclusively on one country.

Ups and downs

The end of 2019 gave rise to real optimism in the Latin American and the Caribbean market for 2020. And January and February did not disappoint, with four new listings raising US$824 million. This included the public offering of Brazilian construction company Moura Dubeux, which raised US$289 million and was the second-biggest transaction in the region in H1.

However, thereafter, IPO activity almost ground to a complete halt, as the global scale of the pandemic became apparent and cases emerged across Latin America. The market had to wait until May for the next listing, when Brazilian parking garage provider Allpark raised US$63.5 million. This was followed by June's listing of Cayman Islands-domiciled Chinese logistics business Dada Nexus, which raised US$320 million and valued the company at US$3.6 billion.

Despite the outbreak, there were seven listings in Latin America and the Caribbean in the first six months of 2020—one more than during the same period in 2019—underlining the strength of the IPO market at the beginning of the year. Indeed, over the past five years, only 2018 saw more Latin American IPOs in the first six months of the year.

In value terms, however, deal activity slipped by historical comparisons. Latin American IPOs raised a total of just US$1.2 billion, down 51 percent compared to 2019, and the lowest figure since 2016.

View full image: IPOs by offering and market size—Latin America and the Caribbean (PDF)

Virtual roadshows

One of the keys to keeping the market open in the latter part of H1 was innovative thinking around the IPO process—which had to change in light of the pandemic. The traditional roadshow, in which executives and their banking advisors meet face-to-face, had to be replaced by a virtual approach.

Brazilian car park operator Estapar showed the way with its online IPO in May last year. The company carried out its entire book-building process through video conferencing, with its successful listing proving this approach is possible.

The floodgates open

This type of innovative approach, coupled with strong investor demand for a series of new issues, led to unprecedented demand in the second half of the year.

Between early summer and late December 2020, there were 22 IPOs which raised a total of US$6.8 billion—by some distance the biggest half-year in the region since 2015, according to Dealogic.

Activity was centered very much around the region's largest economy, Brazil—and on its burgeoning consumer sector. Indeed, four of the top-ten IPOs in the region were in the Brazilian consumer market. In July, for example, fashion group Soma raised US$314 million from its listings. Three months later, Grupo Mateus, a supermarket operator, raised US$636 million in the second-largest listing of 2020. However, even the Mateus listing was overshadowed by Brazil's biggest IPO, which saw Carlyle-backed hospital chain Rede D'Or raise US$1.96 billion—the third-biggest IPO in Brazilian history.

The IPO recovery in Brazil partly reflects the strong bounce-back by the stock market in recent months, with share prices rising more than 82 percent between mid-March and January 2021. Another factor is demand for equities from local investors in the face of Brazil's historically low interest rates.

A mixed outlook

While the market fundamentals and the overall pipeline for IPOs in Brazil look extremely strong, elsewhere in Latin America, the outlook appears more unpredictable. Argentina's troubled economy, in turmoil even before the pandemic arrived, does not provide a conducive environment for new issues. Venezuela's economy has fallen victim to the country's political crisis. The more stable Andean countries—Chile in particular—may offer better prospects given their relative resilience.

However, it is Brazil's revival that will continue to be the big story and all eyes will be on Rio de Janeiro in the coming year.

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