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IntermediateBrazilian REITs · Lesson I1.3 · Module I1

Public offerings: IPOs and follow-ons

Module I1: How a FII is born and grows

11 slides~5 minquiz at the end

In this lesson

  • Initial vs follow-on offering
  • What happens below the minimum
  • Who approves a new offering
See the slides
Doors of the former Bovespa building in downtown São Paulo

Brazilian REITs · Lesson I1.3

How a fund raises money

The first time and every time after — and what happens if money falls short.

Wilfredor · Wikimedia Commons · CC BY-SA 4.0

Two kinds of offering

Debut or a new round

Initial offering (IPO)

  • the fund has no track record yet
  • you buy a promised portfolio

Follow-on offering

  • the share already trades
  • you can compare offer price and market price
  • current holders may get priority

CVM Resolution 160

Who reviews the offering first

InvestorsFirstLater
Professionalautomatic, no reviewautomatic, no review
Qualifiedautomatic, no reviewautomatic, no review
General publicreviewed by an approved self-regulatorno new review if policy and audience are unchanged

Art. 26, VI and VII. Otherwise, the ordinary track, reviewed by the CVM. Retail offerings need a prospectus and fact sheet.

The fundraising thermometer

Offering up to R$ 250M, minimum R$ 30M

  1. cancelledA · R$ 22M
  2. partialB · R$ 180M
  3. offering capmax R$ 250M
minimum R$ 30M

The bylaws may allow a partial placement — as long as the minimum is reached.

The two outcomes

Missed the minimum? The money goes back

A: raised R$ 22M

Cancelled

  • everyone gets back what they paid
  • plus net income earned meanwhile

B: raised R$ 180M

Partial

  • the offering closes with what came in
  • the manager fits the plan to R$ 180M

CVM Res. 175, Annex III, art. 10, §§ 1 and 2.

Who approves a new offering

Two ways to issue shares

Authorization in the bylaws

  • issues without a meeting
  • only up to the written cap and terms

Unitholder meeting

  • holders vote on the offering
  • and decide on pre-emptive rights

CVM Res. 175, general part, art. 48, § 2, VII, and art. 70, III. The cap is known as authorized capital.

The misconception

An offering is not a health certificate

A new offering proves someone wants to raise money. Whether it is good for you depends on price and use of funds.

Remember this

Three ideas from this lesson

  1. Initial or follow-onIn a follow-on, the share already has a market price to compare.
  2. Minimum or nothingBelow the minimum, the offering is cancelled and money returns.
  3. Issuing is not praiseJudge by the offer price and where the money goes.

Quick quiz · 1 of 2

R$ 30M minimum, R$ 22M raised. What happens?

See answer

Cancelled. Money goes back pro rata to what each paid in, with the net income from the cash investments (Annex III, art. 10).

Quick quiz · 2 of 2

The fund announced a new offering. What does that guarantee?

See answer

Nothing by itself. Compare the offer price with the market price and check what the money will buy.

Lesson complete

Next lesson

I1.4Intermediate · Lesson I1.4Pre-emptive rights, leftovers and dilutionIf the fund issues shares and you don't buy: what falls and what stays.Continue
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Educational content, written for learners. Not investment advice.