Nubank goes private in Brazil, maintains stake in US – 09/15/2022 – The Market

oh Nubank Announced Thursday night (15), it intends to cease being a publicly traded company in Brazil and continue to list only on the New York Stock Exchange. In practice, the company’s BDRs, short for Brazilian Depository Receipts, B3, are still listed on the Brazilian Stock Exchange, but now follow the rules of the US market.

Technically, the company’s board of directors has approved the initiation of the process of discontinuing its Stage III BDRs program at B3, which has been moved to Stage I receipts. Nubank’s plan will be submitted to B3 for approval.

Generally, a BDR is a stock exchange-traded receipt backed by foreign listed shares.

The difference is that current documents comply with both the CVM (Securities and Exchange Commission) rules and the SEC (Securities and Exchange Commission), the federal regulatory body of the US market.

According to Condor Insider’s chief strategist Carlos Herrera, the SEC’s rules for controlling and monitoring companies issuing shares are less strict than the Brazilian one. “This will be a key differentiator for the investor,” he opined.

The move comes after Digital Bank’s co-founder and chief executive, David Velez, expressed displeasure with the view of analysts at financial institutions in Brazil regarding Nubank’s shares.

In an interview with Reuters last week, Vélez said some analysts in Brazil expect immediate higher profits from Nubank, but there are steps to take before his thesis can be confirmed.

Of the 17 analyst firms following Nubank’s action, three have a ‘underweight’ recommendation, according to Refinitiv data, all based in Brazil (Ita BPA, Bradesco and Santander). BTG Pactual has a net recommendation.

The announcement also comes in the wake of regulatory and technological innovations that have made it easier for retail investors to trade directly in forex from Brazil.

What changes for Nubank BDR holders?

Once implemented, this exercise will give the Company’s BDR holders the option to acquire Class A common stock traded on the New York Stock Exchange at a rate of 6 BDRs for each share, therefore, to opt for this option, an investor must hold at least 6 BDRs.

Another option is to exchange Tier III BDRs for Tier I bonds on a one-for-one basis. Finally, Nubank investors in B3 will be able to sell their shares.

A BDR is an exchange-traded receipt backed by foreign-listed shares. In stage III, there is a need to register the company with CVM and public offering, which does not happen in stage I.

As a material fact, the company said the plan aims to “increase the efficiency of a publicly held company in more than one jurisdiction and reduce the resulting redundancies.” Additionally, Nubank said the decision does not affect the group’s long-term commitment to Brazil.

With Reuters