Congreso International de Gobierno Corporativo Congreso International de Gobierno Corporativo Bolsa de Valores de Colombia and Inter American Bolsa de Valores de Colombia and Inter American Development Bank Development Bank Cartagena de Indias – Cartagena de Indias – Colombia Colombia november/8/2005 november/8/2005 Bovespa`s Corporate Bovespa`s Corporate Governance Segment Governance Segment Claudio Avanian Jacob Claudio Avanian Jacob BOVESPA – Brazil´s Stock Exchange BOVESPA – Brazil´s Stock Exchange
Congreso International de Gobierno Corporativo Bolsa de Valores de Colombia and Inter American Development Bank. Bovespa`s Corporate Governance Segment Claudio Avanian Jacob BOVESPA – Brazil´s Stock Exchange. Cartagena de Indias – Colombia november/8/2005. BOVESPA An overview. - PowerPoint PPT Presentation
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Congreso International de Gobierno CorporativoCongreso International de Gobierno CorporativoBolsa de Valores de Colombia and Inter American Bolsa de Valores de Colombia and Inter American Development BankDevelopment Bank
Cartagena de Indias – Cartagena de Indias – ColombiaColombia
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
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Brazilian market realityBrazilian market realityFocus on different issuesFocus 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
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Result: Result: under pricingunder pricing
Companies´ Risk Value Misinformation underpricing
Unbalanced rights underpricing
Companie´s Value Adjusted
Source: Seminário Bradesco Templeton
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Primary Market ActivityPrimary Market Activity
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0
1
0
1 1
0
1
0
1995 1996 1997 1998 1999 2000 2001 2002 2003
# of IPOS
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BOVESPA´s StrategyBOVESPA´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
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Novo MercadoNovo MercadoCommitment with corporate Commitment with corporate governancegovernance 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
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Novo MercadoNovo MercadoGroups of requirementsGroups 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
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Bovespa`s listing segmentsBovespa`s listing segmentsNovo Mercado and Levels 1 and 2 Novo Mercado and Levels 1 and 2 of Corporate Governanceof Corporate Governance
Traditional Market
Novo Mercado
Level 1 Level 2
Law requirements
Disclosure requirements
Diclosure and governance
requirements non voting shares
are allowed
Only voting shares
How is the Brazilian How is the Brazilian capital market?capital market?
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A Market for IPOsA Market for IPOsThe success of the Novo MercadoThe success of the Novo Mercado