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Congreso International de Gobierno Corporativo Bolsa de Valores de Colombia and Inter American Development Bank Cartagena de Indias – Colombia november/8/2005.

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Presentation on theme: "Congreso International de Gobierno Corporativo Bolsa de Valores de Colombia and Inter American Development Bank Cartagena de Indias – Colombia november/8/2005."— Presentation transcript:

1 Congreso International de Gobierno Corporativo Bolsa de Valores de Colombia and Inter American Development Bank Cartagena de Indias – Colombia november/8/2005 Bovespa`s Corporate Governance Segment Claudio Avanian Jacob BOVESPA – Brazil´s Stock Exchange

2 2 BOVESPA An overview  Self regulatory organization  Under the supervision of the Brazilian Securities and Exchange Commission (CVM)  Since 2000, Brazil’s only liquidity center for equity trading  382 listed companies  Specialized and electronic trading systems for equity and corporate bonds  68% of the trading in Latin American exchanges  Market Capitalization: US$ 458 billion (oct/2005)  Daily Average Trading Value: US$ 563 million

3 3 Brazilian market reality Focus on different issues  Vast majority of public companies have a defined controlling shareholder  Usually this shareholder is a family or a family group  The Brazilian law allows companies to issue up to 2/3 of shares as non-voting (misleadingly called “preferred” shares)  Many sales of control have resulted in large premiums for the sellers (no tag along rights)  Tender offers to delist companies can be maid at unfair prices

4 4 Result: under pricing Source: Seminário Bradesco Templeton

5 5 Primary Market Activity # of IPOS

6 6 BOVESPA´s Strategy  Reduction of minority shareholder’s ownership risk  Offering “better quality products”  Increase the investors’ confidence and willingness to acquire stocks and pay for them a better price that suits the owner of the company that is going public  Fostering companies to assure good practices of corporate governance related to investor protection  Disclosure/transparency  Minority shareholder rights

7 7 Novo Mercado Commitment with corporate governance  Private sector initiative, based on an enforced through a contract with BOVESPA  Joining is voluntary and market driven  Companies committed to the highest standards of corporate governance  Set of rules over and above Corporations Law reflecting market demands and requirements  Committed with market arbitration panel to resolve conflicts between shareholders, companies and their management, controlling shareholders and BOVESPA

8 8 Novo Mercado Groups of requirements  Rights for minoritary investors: Only voting shares; Full tag along rights; Public tender offer at “economic ” value; Board of directors with 1 year terms and a minimum of 5 members  Disclosure: additional requirements for quarterly statements; financial statements in accordance with international standards; cash flow statements; contracts with related parties, etc.  Dispersion: 25% minimum free float and ensure access for individuals in public offerings

9 9 Bovespa`s listing segments Novo Mercado and Levels 1 and 2 of Corporate Governance Traditional Market Novo Mercado Level 1Level 2 Law requirements Disclosure requirements Diclosure and governance requirements non voting shares are allowed Only voting shares

10 How is the Brazilian capital market?

11 11 A Market for IPOs The success of the Novo Mercado  Better corporate governance contributed to broaden investor interest  Increased confidence, specially from foreign investors  More favorable pricing, stimulated new IPOs  Offers occurred at multiples much higher than the market average

12 12 Primary Market Activity

13 13 What was the outcome?

14 14 IPO’s performance

15 15 IGC x IBOVESPA x IBRX 50 Compared performance

16 16 Listed Companies Novo Mercado and Level 2  Novo Mercado – 16 companies  CCR  SABESP  Natura  CPFL Energia  Grendene  DASA  Porto Seguro  Renar Maçãs  Submarino  Localiza  Lojas Renner  Energias do Brasil  OHL Brasil  Light  Cyrela  Nossa Caixa  Level 2 – 9 companies  Net  Celesc  Marcopolo  Gol  ALL  Eletropaulo  Eternit  Suzano Pet.  TAM

17 17 Listed companies Level 1 – 35 adhesions  Alpargatas  Aracruz  Bradesco  Bradespar  Brasil Telecom  BT Participações  Braskem  Cedro e Cachoeira  Cemig  Cia Hering  Confab  Duratex  Sadia  Suzano Papel e Celulose  Transmissão Paulista  Unibanco  Unibanco Holdings  Unipar  Vale do Rio Doce  VCP  Vigor  Weg  Ultrapar  Fras-le  Gerdau  Itaú  Itaúsa  Klabin  Mangels  Metalúrgica Gerdau  Pão de Açúcar  Perdigão  Randon  Ripasa  Rossi Residencial

18 18 Next Adhesions  Tractebel  Novo Mercado  Secondary  Cosan  Novo Mercado  Primary Novo Mercado Levels of Corporate Governance  Eletrobrás  Level 1  Iochpe Maxion  Level 1  UOL  Level 2  Primary and Secondary

19 19 Novo Mercado BOVESPA’s perception The standard is set  The only model for new listing that is being accepted by the market is the Novo Mercado  Only very specific IPO cases will come to Level 2  The special listings segments represent around 45% of trading and market cap of Bovespa

20 20 A step further  Creating an alternative for a greater number of companies, especially SMEs

21 21 BOVESPA MAIS Pillars Companies committed to CG requirements BOVESPA programs to support companies Greater flexibility in trading Investor with medium- term perspectives Companies committed to their development in stock market BOVESPA MAIS

22 22 Thank you Claudio Avanian Jacob Listing and business development Phone: Website:


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