Goldman, Morgan Stanley, Citi Split Meager Fees in Nubank’s IPO
(Bloomberg) -- Nu Holdings Ltd., the Brazilian digital bank that went public in one of 2021’s hottest initial offerings, paid fees on the deal that were among the lowest of the year.
Goldman Sachs Group Inc., Morgan Stanley, Citigroup Inc. and the rest of Nubank’s underwriters split 1.6% of the $2.6 billion raised in the share sale, according to data compiled by Bloomberg. Among 490 IPOs in the U.S. so far this year, only three paid a smaller percentage, the data show.
Nubank, whose backers include Warren Buffett’s Berkshire Hathaway Inc., paid banks $41.6 million in commissions and discounts, regulatory documents show. That compares to the $83.2 million paid by Brazil’s biggest brokerage, XP Inc., on its 2019 IPO, or 4.26% of the total raised. Payment fintech PagSeguro Digital Ltd. paid 2.36%, and StoneCo Ltd.’s total was 3.56%, the data show.
“Nubank’s IPO was big, and the size plays a role on fees to be paid to underwriters,” said Joelson Oliveira Sampaio, a finance professor at Brazilian business school Fundacao Getulio Vargas.
Among the 17 largest IPOs in the U.S. this year, with at least $1.65 billion, only one, Rivian Automotive Inc.’s $13.7 billion deal, paid a smaller stake to underwriters: 1.4%.
Nubank priced its IPO last week at the top of a marketed range it had earlier lowered. The company sold 289 million shares for $9 each after offering them for $8 to $9, according to a statement. Berkshire, which was a shareholder before the IPO, bought 10% of the shares in the public offering, a person familiar with the matter said at the time.
“The fact that many relevant investors acted as the IPO’s anchor by saying publicly they were willing to buy shares previous to the deal’s pricing also made work a bit easier for underwriters, since the demand was already there, and may justify part of the smaller fees,” Sampaio said.
According to a Nov. 30 prospectus, a group of investors including SoftBank Group Corp., Sequoia Capital, Tiger Global Management and others agreed to purchase as much as $1.18 billion shares of Nubank’s offering.
Nubank’s commissions will be paid to all underwriters, including the ones responsible for the transaction on the Brazilian stock exchange, B3 SA. Simultaneous to its U.S. IPO, Nubank listed Brazilian depositary receipts, known as BDRs, in Sao Paulo. Other banks include UBS BB Investment Bank, Safra Investment Bank, HSBC and Nu Invest.
Fees for equity offerings in Latin America -- IPOs and secondary deals -- through Dec. 9 total $965.78 million, 48% more than in the same period last year, according to London-based research firm Dealogic. That was the most since $1.42 billion in 2007.
In 2018, Argentine cement producer Loma Negra Cia Industrial Argentina SA paid $71.3 million in underwriting fees to the banks responsible for its $1.1 billion initial public offering in October, according to regulatory filings. The 6.5% payout is one of the biggest ever for an IPO in the region.
Morgan Stanley, Goldman Sachs, Citigroup and Nubank declined to comment on IPO fees.
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