markets

NYSE’s Biggest IPO Since Snap Is $2.3 Billion for Brazil Fintech

Updated on
  • Payment processor PagSeguro priced its shares above range
  • It’s the largest IPO by a Brazilian company since 2011

PagSeguro Digital LTD, a payments company owned by Brazilian media group Universo Online SA, raised about $2.27 billion in an initial public offering on the New York Stock Exchange, according to Bloomberg data.

The company, which has a similar model to Jack Dorsey’s Square, sold shares at $21.50 each, above the top of the price range of $17.50 to $20.50 in the offering prospectus, with demand higher than underwriters expected. The equity offering is the largest on the New York Stock Exchange since Snap Inc in March 2017. Investors warmed to the stock, which rose as much as 36 percent to $29.25 in early trading.

The IPO by PagSeguro, a card processing company that has targeted smaller merchants to grow in an industry heavily dependent on Brazil’s biggest banks, is the largest by a Brazilian company since BB Seguridade’s 2011 share sale in the local market. Other Brazilian companies that pulled off initial public offerings abroad last year were Nexa Resources SA and Netshoes Cayman Ltd.

Universo Online sold a piece of its stake in the offering. Also known as UOL, the company claims to be Brazil’s largest online content company, and is owned by closely-held media conglomerate Grupo Folha.

Credit and debit card transactions in Brazil totaled 1.2 trillion reais in the twelve-month period ended in September, the most recent data available on the payment sector association’s website. That’s up 7 percent compared to the same period a year earlier.

Payment-processing companies owned by Banco Bradesco SA, Banco do Brasil SA, Itau Unibanco Holding SA and Banco Santander Brasil SA make up more than three quarters of the industry. PagSeguro holds a 3 percent market share, but transaction volumes have been growing at 2.5 times per year, UBS analysts Frederic De Mariz and Philip Finch wrote in a Jan. 17 note.

PagSeguro has made headway by selling rather than renting card-processing machines, and providing an easier to understand pricing policy to small merchants who wouldn’t accept card payments otherwise. There’s also no pressure to buy other bank-owned products as part of the deal. Rival Cielo SA recently made a foray into PagSeguro’s business model with the purchase of Stelo SA.

Goldman Sachs and Morgan Stanley were the lead underwriters on the deal, with Itau BBA, BofA, Bradesco BBI, Credit Suisse, Deutsche Bank and JP Morgan also part of the sales team.

PagSeguro’s IPO is part of a flurry of equity deals in Brazil slated for the first few months of 2018, ahead of presidential elections in October that are expected to prompt volatility in the markets. Pharmaceutical company Blau, sports retailer Grupo SBF, mid-size lender Banco Inter and Toy retailer Ri Happy, owned by Carlyle Group LP have all filed requests to go public.

— With assistance by Drew Singer, and Eduardo Thomson

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