Congreso International de Gobierno Corporativo
Bolsa de Valores de Colombia and Inter American Development
Bank
Bovespa`s Corporate Governance
Segment
Claudio Avanian Jacob
BOVESPA – Brazil´s Stock Exchange
Cartagena de Indias – Colombia
november/8/2005
BOVESPA
An overview
 Self regulatory organization
 Under the supervision of the Brazilian Securities and Exchange
Commission (CVM)
 Since 2000, Brazil’s only liquidity center for equity trading
 382 listed companies
 Specialized and electronic trading systems for equity and
corporate bonds
 68% of the trading in Latin American exchanges
 Market Capitalization: US$ 458 billion (oct/2005)
 Daily Average Trading Value: US$ 563 million
2
Brazilian market reality
Focus on different issues
 Vast majority of public companies have a defined
controlling shareholder
 Usually this shareholder is a family or a family group
 The Brazilian law allows companies to issue up to 2/3
of shares as non-voting (misleadingly called
“preferred” shares)
 Many sales of control have resulted in large premiums
for the sellers (no tag along rights)
 Tender offers to delist companies can be maid at unfair
prices
3
Result:
under pricing
Companies´ Risk Value
Misinformation
underpricing
Unbalanced rights
underpricing
Companie´s Value Adjusted
Source: Seminário Bradesco Templeton
4
Primary Market Activity
# of IPOS
2
1
0
1995
1996
1
1
0
1997
1998
1
0
1999
2000
2001
0
2002
2003
5
BOVESPA´s Strategy
 Reduction of minority shareholder’s ownership risk
 Offering “better quality products”
 Increase the investors’ confidence and willingness to
acquire stocks and pay for them a better price that
suits the owner of the company that is going public
 Fostering companies to assure good practices of
corporate governance related to investor protection
 Disclosure/transparency
 Minority shareholder rights
6
Novo Mercado
Commitment with corporate governance
 Private sector initiative, based on an enforced through a contract
with BOVESPA
 Joining is voluntary and market driven
 Companies committed to the highest standards of corporate
governance
 Set of rules over and above Corporations Law reflecting market
demands and requirements
 Committed with market arbitration panel to resolve conflicts
between shareholders, companies and their management,
controlling shareholders and BOVESPA
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Novo Mercado
Groups of requirements
 Rights for minoritary investors: Only voting shares; Full tag along
rights; Public tender offer at “economic ” value; Board of directors
with 1 year terms and a minimum of 5 members
 Disclosure: additional requirements for quarterly statements;
financial statements in accordance with international standards;
cash flow statements; contracts with related parties, etc.
 Dispersion: 25% minimum free float and ensure access for
individuals in public offerings
8
Bovespa`s listing segments
Novo Mercado and Levels 1 and 2 of Corporate
Governance
Disclosure
requirements
Diclosure and
governance
requirements
non voting shares are
allowed
Only voting shares
Law requirements
Traditional
Market
Level 1
Level 2
Novo
Mercado
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How is the Brazilian capital
market?
A Market for IPOs
The success of the Novo Mercado
 Better corporate governance contributed to broaden
investor interest
 Increased confidence, specially from foreign investors
 More favorable pricing, stimulated new IPOs
 Offers occurred at multiples much higher than the
market average
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Primary Market Activity
# of IPOS
7
7
2004
2005
2
1
0
1995
1996
1
1
0
1997
1998
1
0
1999
2000
2001
0
2002
2003
12
What was the outcome?
Date
Segment
Consolidated net
revenues¹, US$
million
Natura
05/26/2004
Novo Mercado
460
243
Gol
06/24/2004
Nível 2
485
283
ALL
06/25/2004
Nível 2
263
189
CPFL Energia
09/29/2004
Novo Mercado
2.096
287
Grendene
10/29/2004
Novo Mercado
367
216
DASA
11/19/2004
Novo Mercado
126
158
Porto Seguro
11/22/2004
Novo Mercado
781
136
Renar Maçãs
02/28/2005
Novo Mercado
18
6
Submarino
03/30/2005
Novo Mercado
104
176
Localiza
05/20/2005
Novo Mercado
232
116
TAM
06/14/2005
Nível 2
1.703
226
EDP
07/13/2005
Novo Mercado
1.395
505
OHL
07/15/2005
Novo Mercado
101
212
Nossa Caixa
10/28/2005
Novo Mercado
Company
Value of public
offering, US$
million
364
1. In the previous year
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IPO’s performance
SEGMENT
Novo Mercado
Level 2
COMPARISON BETWEEN STOCKS OFFERED IN IPOS AND BOVESPA'S INDEX
VARIATION
DATE OF THE
PRICE
COMPANY
ADHESION
BOOK 10/31/2005 STOCK IBOVESPA
IGC
CCR
01/02/02
16,24
59,50
266%
139%
221%
Natura Cosméticos
26/05/04
34,50
89,12
158%
58%
91%
CPFL Energia ON
29/09/04
16,29
23,50
44%
30%
55%
Grendene
29/10/04
30,05
17,71
-41%
31%
49%
DASA
19/11/04
20,00
36,50
83%
26%
45%
Porto Seguro
22/11/04
18,01
22,40
24%
24%
45%
Renar Maçãs
28/02/05
1,60
0,68
-58%
7%
15%
Submarino
30/03/05
21,62
30,80
42%
14%
24%
Localiza
23/05/05
11,33
19,30
70%
25%
33%
EDP
13/07/05
18,00
22,40
24%
17%
24%
OHL
15/07/05
18,00
21,00
17%
20%
26%
Banco Nossa Caixa
28/10/05
31,00
37,30
20%
4%
5%
Gol PN
24/06/04
26,32
39,21
49%
46%
85%
ALL PN
25/06/04
9,20
16,50
79%
46%
83%
TAM PN
14/06/05
19,50
28,50
46%
17%
26%
IBRx50
205%
77%
43%
41%
38%
37%
12%
20%
31%
20%
23%
4%
68%
67%
23%
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IGC x IBOVESPA x IBRX 50
Compared performance
3.000
IGC
2.500
2.000
IBOVESPA
IBRX 50
1.500
1.000
500
aug/2005
IGC
9,74%
IBOVESPA 7,69%
IBRX50
10,28%
2005
14,26%
7,05%
15,80%
since 06/26/01
191%
93%
155%
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Listed Companies
Novo Mercado and Level 2
 Novo Mercado – 16 companies
 CCR
 DASA
 SABESP
 Porto Seguro
 Natura
 Renar Maçãs
 CPFL Energia
 Submarino
 Grendene
 Localiza
 Lojas Renner
 Energias do Brasil
 OHL Brasil
 Light
 Cyrela
 Nossa Caixa
Level 2 – 9 companies
 Net
 Gol
 Eternit
 Celesc
 ALL
 Suzano Pet.
 Marcopolo
 Eletropaulo
 TAM
16
Listed companies
Level 1 – 35 adhesions
 Alpargatas
 Fras-le
 Sadia
 Aracruz
 Gerdau
 Suzano Papel e Celulose
 Bradesco
 Itaú
 Transmissão Paulista
 Bradespar
 Itaúsa
 Unibanco
 Brasil Telecom
 Klabin
 Unibanco Holdings
 BT Participações
 Mangels
 Unipar
 Braskem
 Metalúrgica Gerdau  Vale do Rio Doce
 Cedro e Cachoeira
 Pão de Açúcar
 VCP
 Cemig
 Perdigão
 Vigor
 Cia Hering
 Randon
 Weg
 Confab
 Ripasa
 Ultrapar
 Duratex
 Rossi Residencial
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Next Adhesions
Novo Mercado






Cosan
Novo Mercado
Primary
Tractebel
Novo Mercado
Secondary
Levels of Corporate Governance

UOL

Level 2

Primary and Secondary


Eletrobrás
Level 1

Iochpe Maxion

Level 1
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Novo Mercado
BOVESPA’s perception
The standard is set
 The only model for new listing that is being accepted by
the market is the Novo Mercado
 Only very specific IPO cases will come to Level 2
 The special listings segments represent around 45% of
trading and market cap of Bovespa
19
A step further
 Creating an alternative for a greater number of
companies, especially SMEs
20
BOVESPA MAIS
Pillars
BOVESPA programs to
support companies
Investor with mediumterm perspectives
BOVESPA
MAIS
Greater
flexibility in
trading
Companies
committed to CG
requirements
Companies committed to their
development in stock market
21
Thank you
Claudio Avanian Jacob
Listing and business development
Phone: 55 11 3233 2004
E-mail: [email protected]
Website: www.bovespa.com.br
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