Gafisa, Hypermarcas Join Equity Revival

In what is starting to look like a fevered rush to Brazilian equity markets, 2 more companies have expressed their intention to raise equity capital. Gafisa, a residential homebuilder, says it will very soon file a BRL600m-BRL700m offer, including Bovespa-listed shares and ADRs. JPMorgan and Itau BBA have been mandated to lead. Gafisa stock dropped 6.7% to BRL17.0 Tuesday, much steeper than the 0.9% retracement in the Bovespa. And Hypermarcas, a consumer products retailer, also filed a statement in response to a news report saying it had engaged banks to advise on an equity offering. The company went public in April 2008 at BRL17.00 via Merrill Lynch and Citi. It closed Tuesday at BRL21.05, down 6.4% on the supply news. Other equity hopefuls include Natura, MRV and VisaNet and bankers are gearing up for a second half revival in Brazilian equity. “Many of the companies that did IPOs have used up the cash and need to come back to market,” says Itau BBA executive VP Jean-Marc Etlin on the sidelines of a conference in New York earlier this month. “What’s been surprising is how quickly the market tone has changed,” says a Sao Paulo-based head of investment banking, noting that most of the deals that have been announced have been waiting for months to launch. Investors say there is appetite for substantial issuance from robust names. “[Companies can issue,] as long as issuers have the right pricing in mind and it’s the right story,” says Will Landers, portfolio manager at BlackRock, which manages $5bn in LatAm equity. This year has seen meager equity issuance in LatAm: $1.15bn through May 20 versus $7.24bn in the corresponding period of 2008, according to Dealogic. Brazil central bank president Henrique Meirelles warned in a speech yesterday that foreigners run the risk of displaying excessive euphoria in their belief Brazil will sail through the crisis unscathed. Increasing investment and potential for new equity issuance is a plus, but overconfidence is always a danger,