There were no shortage of alerts from banks and managers about the risk of a billionaire IPO of a Brazilian company at the moment, in the midst of an electoral turmoil. But the payment company Stone decided to move on and, it seems, can do well. A group of heavyweight names, including billionaire American investor Warren Buffett, is embarking on the operation.
The company plans to raise as much as $1.1 billion in the offer. Stone, owner of the green processing machines, was established only five years ago. Its board of directors is chaired by one of the founders and shareholder, André Street, a 34-year-old executive.
Yesterday, Stone reported its benchmark price per share range of $ 21- $ 23 for its listing on Nasdaq. At the average price, it will reach the stock market with a market value of $5.9 billion. In the prospectus, the company reported that there is a group of investors interested in acquiring most of the shares tendered. It is a type of anchorage – but in this model, there is no obligation to purchase, just a signal: Investors are willing to announce to the market that they must enter the IPO.
In that format, Berkshire Hathaway, Buffett’s investment company, could hold about a third of the shares offered by Stone. Berkshire indicated interest in buying about 13.7 million class A shares of the Brazilian company, which represents 33.5% of the company’s primary offering. Considering the total sales volume, it represents 28.7% of the transaction, representing a little more than 47 million shares. Managers T. Rowe Price and Madrone Opportunity, who are already shareholders, may increase their holdings.
The investment in Stone could be Buffet’s biggest investment in a Brazilian company. The value of $315.4 million (corresponding to about R$ 1.2 billion) that Berkshire is willing to invest in Stone – considering the total volume indicated at the maximum price of the indicative band – is similar to what the Buffett allocated on India’s One97 Communications in August this year. The group is the controller of Paytm, India’s largest mobile payment company and also Berkshire’s first major investment in that country.
So far, Buffett’s closest relationship with Brazil has been indirect, with his joint participation in some of the works of Brazilian investment company 3G Capital. One of Stone’s advisors, Roberto Motta, is one of the founding partners and board member of 3G. Last year, Berkshire also announced its intention to expand its real estate investment to Latin America, including Brazil. Berkshire also probed the possibility of acquiring a stake in Brazilian reinsurer IRB.
Berkshire has a number of papers in the financial sector, such as American Express, Visa, MasterCard, Apple and Wells Fargo. The target figure for Stone is unremarkable for the Berkshire universe, which has revenues of $242 billion and a market value of $ 521 billion. But it makes all the difference for the Brazilian company. “Of course it’s easier to raise the share price and attract more investors when Buffett has already announced that he is interested in his company”, says a Brazilian manager.
Shareholder André Street had already set up three payment technology companies before forming Stone. After the sale of one of them, Braspag, in partnership with Eduardo Pontes, joined the banks BTG Pactual and Pan to create Stone and compete with the banks’ payment arms Cielo and Rede and with “moderninha”, PagSeguro’s machine. Over the course of five years, the partner banks left the capital of the company, which received investment rounds from major managers, such as American Tiger, the British Actis and the Brazilian Gávea. Pontes is the vice president of the company’s board.