Agibank considers IPO in NYC, once again

Contxto – Brazilian tech companies continue to push the envelope as Agibank probes an initial public offering (IPO) in New York City. The corporation’s CEO Marciano Testa announced the possibility on January 29 without an official launch date.

What does Agibank do?

The online lending platform is the latest Brazilian enterprise contemplating major international ventures in the U.S. Last year, three companies from Latin America’s largest country reported shares in New York City.

These included payment processors StoneCo Ltd and PagSeguro Digital Ltd, as well as educational software firm Arco Platform Ltd.

Today, Agibank has accumulated over 530,000 clients (most of whom are low-income consumers) and 450 storefronts. As of March 2018, Agibank’s loan book totaled 1.2 billion reais (more than $US321 million). The firm also saw an equity return of 53 percent – well above the industry average of 18 percent.

Prospective IPO funds for Agibank would cover technological investments, acquisitions and marketing.

How has Agibank been challenged?

According to Testa, the potential IPO depends on government authorization of foreign capital in banks. Brazil’s new president, Jair Bolsonaro, said the country’s central bank should be solely responsible for overseeing such transactions. This could mean potential license issues for smaller entities like Agibank.

The reality of the situation is that Agibank has gone back and forth about a U.S. IPO for a while. Last September, Agibank canceled its original IPO due to missing a legal deadline, according to a source.

At the time, Agibank was seeking 10 billion reais (US$2.45 billion) for the endeavor in the B3 Stock Exchange. Media reports stated that the company postponed it due to weak market demand at the time. A complicated election year in 2018 also resulted in Agibank struggling to attract investors.

Above all else, the recent U.S. government shutdown may have some reciprocal effects on Agibank’s IPO.

How did the U.S. government shutdown affect IPOs?

From December 22, 2018 until January 25, 2019, the U.S. government shutdown for 35 dreadful days. Not only did federal workers miss payments but tech unicorns like Uber, Lyft and Pinterest couldn’t raise funds from the public markets.

With that, international IPOs were postponed and may experience inevitable delays despite the recent reopening.

“I could easily see this pushing back everyone by at least 30 days,” said Pat Healy from Issuer Network (an IPO consulting service) to CNBC. “It’s possible now you will not see a substantial IPO market until March.”

Based on the ramifications of the government shutdown, plus political tensions in Brazil, the success of Agibank’s IPO could go either way. Although U.S. federal services have rebooted, I’m most curious to see how Bolsonaro’s administration will tweak national banking policies.

One way or another, Brazilian enterprises mean business. Cheers to hoping for international investments, decentralized banking and less government shutdowns.

-JA