Brazil’s Senior Solution Drops After IPO Priced Below Target

Senior Solution SA declined in its first day of trading after the software developer became the latest Brazilian company to price shares below its targeted range in an initial public offering.

Shares ended the session at 11.07 reais, a 3.7 percent drop from the offering price of 11.50 reais. The stock retreated as much as 17 percent in intraday trading. The benchmark Bovespa index fell 0.7 percent.

The decline in its trading debut comes after the Sao Paulo-based company on March 6 sold the shares below its planned range 13.50 reais to 15.50 reais. Three of the five companies that completed IPOs in Brazil since the beginning of 2012 have sold stock at a lower price than initially projected, according to data compiled by Bloomberg.

“The results of Senior Solution’s offering and today’s decline seem a bit uncomfortable at first sight, but that’s not a surprise because investors tend to be more cautious about smaller offerings done by smaller companies, given reduced stock liquidity and analyst coverage,” Roberto Altenhofen, an analyst at Sao Paulo-based consulting firm Empiricus Research, said by phone. “It’s not a fair starting point to try to predict how successful IPOs will be in Brazil this year.”

Senior Solution’s market capitalization was 90.9 million reais ($46.7 million) at the close of trading, with 8.2 million shares outstanding, according to data compiled by Bloomberg. The company said this week in a statement that it is raising as much as 62.2 million reais in the offering.

Linx IPO

Edemir Pinto, chief executive officer of exchange operator BM&FBovespa SA, called the IPO “a big victory” for the Brazilian market.

“The success of the operation lies in the fact that the company reached its goal of making its offering and raising resources to make possible its expansion plans,” Pinto said in an e-mailed statement in response to questions about the offering.

Brazil’s last IPO was Feb. 6, when Linx SA, a communications technology provider, raised 527.9 million reais in primary and secondary offerings. The company sold shares at 27 reais, the high end of its projected range.

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