Capital availability keeps Mexican startups away from stock exchanges

Mexico’s most popular startups are unlikely to be able to revive the country’s IPO wasteland.

Businesses like used car dealer Kavak, small business lender Konfio Ltd., the payment processor Clip, and the cryptocurrency platform Name, have raised more than $ 1 billion with private investors this year.

But when the time comes to go public, these companies will likely seek to follow their Latin American peers and try to list north of the border, he said. Martin Werner, a former Goldman Sachs investment banker who became CEO of special purpose acquisition companies known as SPACs.

“All of them, from the most innovative technology companies, are thinking of going to the Nasdaq when they go public, because there are investors and comparables”.

However, in Nasdaq there is a risk that they will get lost in the crowd. By listing in Mexico, companies are likely to gain more coverage from analysts and gain places on national indices, helping to attract global investor flows.

Representatives for the four startups declined to comment.

It has been 15 months since the last initial public offering of a company in Mexico and four years of the last price close to US $ 1,000 million.

Since last year, five companies have started the delisting process. The scene is in contrast to that of venture capital in which Latin American companies, including those in Mexico, have raised a record $ 11.27 billion this year with 180 deals reported so far in October, or three times the amount in 2020, according to data compiled by Bloomberg.

PoplarFor example, after raising $ 700 million in September, it reached a valuation of $ 8.7 billion. The large amount of private equity means that none of the new Mexican companies feel pressured to go public soon. For its part, SoftBank Group Corp., which backed the four new companies in the country, just launched a second Latin American fund last month.

Werner, who has brought two special buyout companies to Nasdaq, blames liquidity as one reason many Latin American companies will continue to favor U.S. listings.

Mexico lacks a strong retail market to boost business trading and has a highly concentrated local pension fund industry, with four of the 10 companies owning 65% of worker funds, according to September data from the regulator.

Since 2019, six Brazilian firms have listed in New York, according to data compiled by Bloomberg, including some of the most valuable startups in the country. And another important flow is coming, thanks to the most valued startup in Latin America, Nu Pagamentos SA, the digital lender backed by Berkshire Hathaway Inc. of billionaire Warren Buffett.

NubankAs the company is known, it is preparing to go public in the United States, people familiar with the process said in August.