Less than 10 months after holding a double IPO on NYSE and B3, the Brazilian Stock Exchange, challenger bank Nubank decided to remain public only in the US. The news was given by the company through a material fact, highlighting the desire to “maximize efficiency and minimize consequential redundancies of a publicly-held company in more than one jurisdiction”.
The neobank held its listing in Brazil through the negotiation of level III Brazilian Depositary Receipts (BDRs), which were equivalent to one sixth of a NYSE share. At this level, the company must be registered and follow the rules set out by the Brazilian regulators. Now, the company starts operating at level I, which has fewer requirements.
The simultaneous double-listing at the end of 2021 valued the company at $41.5 billion, placing Nubank as the most valuable bank in Latin America, ahead of local giants such as Itaú and Bradesco in terms of market value. In addition, the firm attracted a record 815,000 retail investors with its BDRs.
Although the company did not comment on other motivations for downgrading its status on B3, it is possible that the drop in share value, which led to a scenario of low liquidity of BDRs – and a flurry of memes and jokes making fun of those who put money into the neobank’s IPO – played a role in the decision. According to Brazilian news website Neofeed, the average volume traded for these assets in September was around 5%, well below the volume of the company’s shares in the US.
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In May 2022, the bank’s shares reached $3.31, with a market value equivalent to one third of Itaú’s valuation, which is approximately $40 billion. To appease investors, the fintech released its financial results for the first quarter, which according to CEO David Vélez, represented “the strongest quarter in Nu’s history”. The company reported adjusted net income of $10.1 million for the period, reversing an adjusted net loss of $13.1 million in the same period in 2021.
Alongside the announcement of the plan to discontinue the Level III BDRs program, Nubank informed that the decision “does not affect the long-term commitment of the Nubank Group to Brazil, nor to the Brazilian capital markets”. The company will continue to trade on B3, but now under the Tier I, or unsponsored, BDR category.
The proposal will be submitted for B3’s approval and, if approved, will give three options to the holders of Level III BDRs: to continue as shareholders receiving class A common shares traded on the NYSE; to remain the holder of Nubank’s BDRs through an exchange to Level I BDRs; or sell the assets on the Brazilian or US stock exchanges.
