Biosev Shares Drop after Money Back Guarantee IPO

The Brazilian unit of Louis Dreyfus Holding BV, Biosev SA has tumbled right in its debut after giving investors a money back guarantee in the IPO. Shares of company dropped by 14% and a single share is currently priced at 12.85 Reais. The shares actually went down by 16% at one point of time, however, later; it pared the losses a bit. As far as last Friday’s data are concerned, the benchmark gauge of Brazil, the Bovespa Index went ahead by 1.4%, pretty different from fate of Biosev SA.

Incidentally, Biosev SA is the 2nd largest sugar cane processor in Brazil and during the initial public offering; the company gained 805 million Reais. During the initial public offering, each share was sold for a price of 15 Reais and options were put for 25 centavos that allowed the investors to return the stock for a price of 16.57 Reais within the next 15 months. These details were clearly mentioned in the prospectus of the initial public offering, held on 15th April. In the offering, Louis Dreyfus, based in Amsterdam, bought 100 million Reais of stock and currently Biosev is controlled through 3 different companies.

Luiz Roberto Monteiro, who works as a broker at the Renascenca DTVM, stated that the controlling shareholders’ purchase in the initial public offering has sent a bad signal to the market and thereby made the investors worried as well. Many started feeling that the IPO was sort of overpriced and hence, a fall in the share prices is pretty much expected.

As far as an initial prospectus released on 10th April is concerned, Biosev had plans of raising at least 945 million Reais in the stock offering, a target that the company has definitely failed in achieving.

Apart from Biosev, two other Brazilian companies also held initial public offering right in this year. Incidentally, in 2012, the Latin American country witnessed the lowest number of offerings since 2003. The other two companies having the IPO in this year are: Senior Solution SA and Linux SA. Since the offering, the former has gained around 0.6%. During the IPO, the shares were priced below the expected range. On the other hand, Linux SA, the software maker is up around 18% since it started trading. During the IPO, the company priced the shares at the top of the expected range.

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