Canceled Real-Estate Deal Throws a Wrench in Brazil’s IPO Rush
In Brazil, one of the world’s worst hotspots for the coronavirus, a crowded pipeline of initial public offerings got a harsh reality check.
Bloomberg reports that Brazilian builder Direcional scrapped plans this Tuesday to list shares of its unit Riva 9, a real-estate developer focused on middle-income housing. The firm cited “unfavorable market conditions”.
This decision marked a disappointing start to what had promised to be a busy stretch of equity sales in Latin America’s largest economy. According to data compiled by Bloomberg, four Brazilian companies are still due to hold IPOs over the next two weeks. Including an education firm, which is going public in the U.S. but has yet to announce a pricing date, could boost Brazil’s tally to five: the highest number for any fortnight since 2007.
“Brazilian issuers are seeking to take advantage of the dissonance that has seen equity markets soaring around the globe amid a global health catastrophe,” Bloomberg reports.
Money managers in São Paulo said they’ve been flooded by pitches from bankers in recent weeks as companies that put off sales at the beginning of the pandemic look to capitalize on resurgent demand.
“Companies are worried that this window may be relatively short due to the disconnect between market levels and the state of the real economy,” said Pablo Riveroll, the head of Latin American equities at Schroders Plc in London.
While Brazilian stocks have bounced back 64% from their March lows, the local economy is expected to shrink almost 6% this year.
Several of the companies seeking to go public have challenging histories. Among the firms are an Advent-backed home improvement retail chain, which the private equity firm has held onto for more than a decade, a money losing high-end clothing retailer and a spin-off of a pharmaceuticals company that’s down 70% since it debuted in 2006.
Globally, the IPO picture is mixed. Sales reached $83.1 billion in the past three months, up from $68.5 billion during the same period last year, with China’s red-hot market accounting for almost half the total, according to data compiled by Bloomberg. The number of deals, however, declined to 370 from 423.
While Brazil’s market is seeing a surge in volume, the amount being raised is modest. The four companies are targeting just 6.4 billion reais ($1.2 billion) – less than what retailer Lojas Americanas SA got in a follow-on offering two weeks ago.
A proliferation of smaller asset-management funds and strong demand from retail investors may provide demand for the sales. Foreigners, on the other hand, have bought only about 36% of local share sales in the first half of the year, down from 47% during the same period last year, according to stock exchange data.
“With more AUM in local equity funds, corporates are taking advantage of the opportunity to tap the markets and refinance debt, invest in future growth, or both,” said Malcolm Dorson, who helps manage about $950 million of emerging-market funds at Mirae Asset Global Investments in New York.
Flat.mx Raises $25M Debt Financing To Modernize Buying Homes In Mexico
Flat.mx, a property tech startup, has raised $25 million in debt financing from Arc Labs. The new financing gives the Mexico City-based company a raise of approximately $30 million. It raised a pre-seed round of $5 million in September 2019, co-founder Victor Noguera told Crunchbase News.
Flat.mx, which focuses on iBuying–a process that removes the hurdles to selling a home–is in the middle of the Y Combinator summer program and will use the cash infusion to scale the company, so it can purchase properties, then renovate and sell them.
“This is a very capital-intensive business…The typical home costs $150,000, which generates a barrier of entry, so we wanted to raise a debt round to scale quickly,” Noguera said.
Noguera- a financial consultant- and Bernardo Cordero- who worked for Linio, a Latin American e-commerce marketplace- first met each other at UC Berkeley and later reconnected when Noguera was looking into building a fintech company. Once they saw the booming proptech industry, Flat.mx was born.
There is not a Multiple Listing Service in Mexico, which means there is no one source of information to find out what a home is worth, so property owners end up overpricing their homes, which leads them to sitting on the market longer.
“The more we looked at it, we saw that Mexico’s real estate industry was still doing transactions the way it was 40 years ago,” Cordero said. “If you wanted to buy a property, it could take nine months or a year to sell your home. We saw a huge opportunity there.”
Instead, Flat.mx will buy the homes instantly–cutting the time on the market from a year to weeks–do any renovations, and turn the house around in about two months, Noguera said. The company also provides a 30-day buyback warranty for buyers.
The company is currently purchasing homes in 50 neighborhoods around Mexico City and has built a small team of 30 people. Noguera and Cordero expect to expand into other cities in the next year.
“Our vision long term is to be a marketplace, like the Amazon of real estate,” Cordero said. “We are also forming partnerships with mortgage brokers to help buyers get mortgages quickly. iBuying is a stepping stone to creating an ecosystem.”
Latin America will be Poorer after the Pandemic, IADB President Says
Latin America will emerge from the COVID-19 pandemic with higher poverty rates as efforts to control the virus lead to spikes in unemployment and indebtedness, Inter-American Development Bank President Luis Alberto Moreno said in an interview.
As reported by Reuters, Latin America- where economic growth has already been slowing in recent years- is expected to see an economic contraction from 8% to 10% in 2020 as a result of the coronavirus and associated quarantine measures, Moreno said.
The pandemic “will impoverish not only Latin Americans, (but also) the world in general, but clearly Latin America is going to be hit much harder because we are an emerging (market) region,” he said.
This year, the IADB- Latin America’s largest regional lender- will approve nearly $20 billion dollars in loans. Around $15 billion of those will go to governments to strengthen healthcare systems, Morena added.
‘Nothing’ For Venezuela
The sharpest contraction in the region has taken place in Venezuela. Moreno said the IADB cannot provide any funding for the government of President Nicolas Maduro because his administration is in default on some $700 million in loans.
Venezuela has been in recession for six years and annualized inflation exceeds 3,500%, according to the opposition-run National Assembly, which calculates economic indicators due to delays in the release of official figures, according to data from Reuters.
“There is absolutely nothing we can do for Venezuela.There’s no country in the history of humanity that has seen a contraction as deep as that of Venezuela without having had a war or a natural disaster or both,” Moreno said.
Moreno added that Venezuela’s vast oil reserves, coupled with the country’s decades of infrastructure development due to oil income from previous years means that it will have a better chance to turn its economy around after a change in government.
The Not Company, a Maker of Plant-Based Meat and Dairy Substitutes in Chile, Will Soon be Worth $250M
The Not Company, Latin America’s leading contender in the plant-based meat and dairy substitute market, is about to close on an $85 million round of funding that would value it at $250 million, according to sources familiar with the company’s plans.
Tech Crunch reports that the latest round of funding follows a series of successes for the Santiago-based business. In the two years since NotCo launched on the global stage, the company has expanded beyond its mayonnaise product into milk, ice cream and hamburgers. Other products, including a chicken meat substitute, are also on the product roadmap, according to people familiar with the company.
NotCo is already selling several products in Chile, Argentina and Latin America’s largest market- Brazil- and has signed a massive deal with Burger King to be the fast food chain’s supplier of plant-based burgers. It’s in this Burger King deal that NotCo’s approach to protein formulation is paying dividends, sources said. The company is responsible for selling 48 sandwiches per store per day in the locations where it’s supplying its products, according to one person familiar with the data. That figure outperforms Impossible Foods per-store sales, the person said.
NotCo is also now selling its burgers in grocery stores in Argentina and Chile. And while the company is not break-even yet, sources said that by December 2021 it could be — or potentially even cash flow positive. With the growth both in sales and its diversification into new products, investors around the world have taken note.
Sources said that the consumer brand-focused private equity firm L Catterton Partners and the Biz Stone-backed Future Positive were likely investors in the new financing round for the company. Previous investors in NotCo include Bezos Expeditions, the personal investment firm of Amazon founder Jeff Bezos; the London-based CPG investment firm, The Craftory; IndieBio; and SOS Ventures.
Alternatives to animal products are a huge (and still growing) category for venture investors. Earlier this month Perfect Day closed on a second tranche of $160 million for that company’s latest round of financing, bringing that company’s total capital raised to $361.5 million, according to Crunchbase. Perfect Day then turned around and launched a consumer food business called the Urgent Company.
Citi Unveils New Supplier Finance Mobile App in Latin America
Citi has announced the launch of a new mobile app to facilitate suppliers enrolled in Citi Supplier Finance domestic programs access to working capital in Latin America.
Citi is driving the digitization of transaction banking in Latin America, and its digital solutions intend to help clients to overcome financial challenges due to the COVID-19 pandemic. The new mobile app comes as an additional component of the digital offering, joining other solutions including electronic self-service tools to onboard suppliers. The mobile app provides suppliers 24/7 visibility of receivables available for discounts, payment status, and transaction history.
“In the past months, we have showed our clients that we are here to support their business needs and those of their suppliers. We are very excited to launch this app and be able to offer suppliers across Latin America a convenient and easy-to-use channel, wherever they are,” said Mauricio Tarazona, Latin America Trade Working Capital Finance Head.
The Citi Supplier Finance mobile app was initially launched for both iOS (12+) and Android (7+)* smartphones in Paraguay, Brazil, El Salvador, Honduras, and Peru.
According to IBS Intelligence, the firm has plans to launch the service in other countries in the region in the future. Currently, Citi Supplier Finance programs serve hundreds of corporate clients and more than 18,000 suppliers across LATAM.
The new finance mobile app benefits include:
- Select receivables to be discounted using the mobile device.
- Access to Citi Supplier Finance domestic programs in which the user is enrolled, with 24/7 visibility of receivables available for discount, payment status, and transactions history.
- A user-friendly interface allows for quick and easy transaction initiation and approval/rejection processes.
- Platform with Citi’s security standards that offers a seamless connection, using existing Online Payment Channel web-based platform login credentials.
“With clients increasingly embracing mobile, we continue to innovate, reflecting the changes in clients’ business models and certain priorities,” said Andre Carvalho, Latin America Trade Head.
Coronavirus 'Clears the Map' in Mexico, Impacting 150,000 Small Businesses
The National Alliance of Small Merchants (Anpec) found that the coronavirus pandemic has caused bankruptcy and disappearance of 150,000 Mexican small businesses, as reported by PubliMetro.
Anpec’s findings revealed that 93.52% of the establishments were forced to close due to the decrease in sales and the high cost of public services such as electric power and gasoline. The lack of working capital and reduced terms for payment to suppliers also hindered these small businesses.
The president of the Anpec, Cuauhtémoc Rivera, noted that nine out of 10 merchants are also affected by their lack of money to pay the rent and wages of their employees. He added that the economic crisis unleashed by COVID-19 has caused a collapse of 20% to 50% in small national trade sales; whose impacts have been felt in 91% of businesses.
During a videoconference, Rivera indicated that 79% of the business declared that “their customers are not enough” to buy the “basket basic”.
Bolivia Delays Presidential Election Due to Pandemic
Last Thursday, Bolivia’s highest electoral authority delayed presidential elections by more than a month due to the coronavirus pandemic.The Supreme Electoral Tribunal moved the election date from Sep. 6 to Oct. 18: the third time the vote has been delayed.
The president of the tribunal, Salvador Romero, told reporters that Bolivian and international experts had advised the body that the uncontrolled spread of the novel coronavirus in the country made holding the election in September unfeasible.
The party of former President Evo Morales, who was ousted last year and replaced by an interim president, objected to delaying the vote and insisted that Bolivia’s Legislative Assembly must approve any change in the date.
Morales’ party, the Movement Toward Socialism, controls the Assembly. Romero insisted that legislative approval was not necessary.
Morales has said vote delays would extend the country’s crisis of legitimacy, make it even harder to govern, and would worsen the pandemic.
Bolivia has more than 64,000 confirmed cases of COVID-19, and more than 2,300 deaths, a toll that is overwhelming it’s hospitals and other infrastructure. Romero said cases could be peaking between now and September.
Brazil’s Magnetis Raises $11M in a Series B Led by Redpoint Eventures and Launches Brokerage
Digital wealth management solution Magnetis, recently closed a $11M Series B investment round led by Redpoint eventures, with participation from Vostok Emerging Finance. Magnetis is Brazil’s first digital wealth platform powered by AI.
Luciano Tavares, founder and CEO of Magnetis commented on the investment, “It only reinforces the credibility of our service and business model, which uses technology for goal-based investment management, without creating a conflict of interest.”
According to LatAm List, Tavares explained that the new funding will be used to launch their own brokerage and to develop new functionalities that improve customer experience by providing a personalized journey through goal-based investments.
“Magnetis’ algorithm chooses the best path to achieve a client’s financial goals in a holistic manner, taking into account the client’s priorities, risk profile, and financial objectives in long-term investment plans of up to 100 years. Its robo-advisor analyzes and executes the best investment decisions, always keeping clients’ portfolios well-balanced and diversified. However, the company’s human consultants are always available to assist customers.”
To avoid conflicts of interest on the part of banks and brokers, Magnetis adopted a fiduciary remuneration model, which means they do not receive commissions on the products they recommend to customers.
“The vision is to be a financial guide for our clients; making their investment experience simpler. A total integration with the broker makes the client’s journey simpler, more consolidated and complete,” said Tavares.
Since founding in 2015, Magnetis has set up over 350,000 investment plans and has more than $82.8M (R$430M) under management, and plans to double this amount to $192M (R$1B) within the next year.
“Magnetis is well-positioned for accelerated growth and our team at Redpoint is excited about guiding them during this new phase of our partnership as the fintech sector continues to boom in Brazil and beyond,” said Anderson Thees, founder and managing partner at Redpoint eventures.
Chilean Startup Burn to Give Raises $8.5M Series A
Burn to Give, a purpose-driven wellbeing and insurtech startup, raised an $8.5M Series A, the largest funding round achieved by any Chilean startup at this stage.
Burn to Give offers a wellbeing and insurance platform. It empowers organizations and employees to improve their health and wellbeing, while positively impacting the lives of others.
“We are creating a purpose-driven life insurance service that celebrates life, inspires living, and focuses on rewarding those who have taken responsibility for their health and overall wellbeing,” Burn to Give explained.
LatAm List reports that Burn to Give offers an instant smart group life insurance cover that includes telemedicine, data insights, and well-being programs. It combines employee benefits and charitable contributions, which in turn lead to employee wellness.
The funding comes from both local and international investors, including Albatross Capital, Grupo Prisma, and Norwegian Katapult Impact. Various private investors from JP Morgan, Endeavor Capital, Grupo Bio Ritmo, and Genesis Investment Management.
Uber Eats Changes the Commission for Restaurants: A Proposed Solution that will do Little to Help
This week, dataPlor was featured in Merca 2.0’s article discussing Uber Eat’s commission system for restaurants.
Uber Eats has reportedly decided to relax its commission scheme for restaurants, and continue battling to obtain profits via digital app food delivery (Milenio).
The article highlights dataPlor’s survey which found that 35.9 percent of restaurants in Mexico said they had reduced their workforce to survive during the pandemic, in which they reported declines in sales of between 85 and 90 percent.