In the document offering the shares of wine e-commerce Wine, it is possible to get an idea of the company’s numbers right on the first ten pages – but to know the net result, in fact, only arriving on page 216.
At the biofuel producer Granbio, the main numbers are from sheet 176 of a material of more than 700 pages, while in the document of the manufacturer of cleaning products MPR Participations the selling shareholder in the secondary tranche is not identified.
The sales intermediation site Sick does not say what it will do with the resources it intends to raise in the primary operation and the 3R Petroleum details your data by assets, but understanding the consolidated financial result takes more time.
With dozens of initial stock offers (IPOs) in preparation, understanding who the companies are and what they propose for their journey as a public company has become an increasing challenge for investors.
In addition to the conversations with analysts and reports that precede the debut on the stock exchange, the main material for individuals is the offer documents that companies make available on the Securities and Exchange Commission (CVM) website.
It is a bunch of hundreds of pages and a lot of technical information, but it is the basis of all the potential and all the risk that the investor is buying.
This document will be updated as the offer progresses. In the case of the companies mentioned above, the material already available to investors at the CVM is still a draft preliminary prospectus – when it is updated and actually becomes a preliminary prospectus, opening information such as the allocation of funds and the selling shareholder becomes mandatory.
The difference between the draft and the prospectus is the offer phase: in the draft, the CVM is still analyzing the transaction and may request changes; on the side of the company and the coordinating banks, it is not yet possible to receive stock reservation requests.
It is on the opening pages of its offer material that the company summarizes what it wants to highlight. For this reason, they usually bring the best numbers and promises – and it is on these home pages that most investors arrive. It is in the summary, for example, that some companies have chosen to include a letter from the founder or the personal and professional history of the entrepreneur behind that company, as Havan did.
The CVM determines what data is essential in these documents, but where and with what prominence is the choice of companies. “If it is a newer and growing company, perhaps the net result, for example, is not the most important indicator to highlight, but rather its pace of sales or cash generation”, Justifies a source.
This executive quotes the cases of Wine and other registered technology companies, such as Enjoei, Housi and Méliuz, as a new challenge for reading the numbers for the national investor — less accustomed to this type of offer from startups. In some of these companies, another indicator appears among the main ones, the so-called “churn rate”, a metric of customers who cancel services or subscriptions online.
For some market players, retail sometimes seems to take time disadvantage in accessing information. “The retail investor does not have meetings with the company and the banks, but institutional ones do. Managers are already aware of what information fills the gaps in the minutes, ”says a source.
For CVM technicians and coordinating banks heard by the Value, this would not constitute an asymmetry of information among investors because it is done in the pre-sale phase. That is, when the company is still in the so-called “investor education”, which are rounds of presentations without doing business. The banks also argue that this bridge with retail is made through analysts, who participate in initial meetings and make their assessments.
“The updates to the documents throughout the offer process are more quantitative, but the qualitative information is basically there from the beginning. The difference between the draft and the prospectus is that it is only in the second that there is already an effective sales effort and that is where an investor’s decision will take place ”, says Jean Arakawa, partner at the Mattos Filho firm specialized in capital markets.
For him, companies today provide a much greater volume of information than they did in the past, including the publication of detailed minutes. “In addition, before 2009, companies did not have to publish the reference form, which is a very detailed and extensive document”, he explains.
The availability of the draft, for example, is a prerogative and not a CVM determination. The municipality understands that giving visibility to information about a company and offer already allows greater scrutiny by the investor. With a volume of offers outside the curve, comparable only to 2007, the CVM has also reinforced its supervision over the volume of information that companies provide and includes items that are not applicable in a preliminary prospectus.
How to analyze all the details with a magnifying glass becomes more difficult with a large number of operations, in some cases the market regulator defines the rule and the company that complies with it – even if there is no supervision by the CVM at the moment, it has already warned how it should be, that is, the company can be punished for that.
This is the case with advertising material for share offers. CVM previously analyzed each material before it was released by the company. Today, companies don’t have to submit advertising beforehand, but they do have rules to follow.