Argentina's Biggest Company Eyes Local Listing If Rules Change

(Bloomberg) -- MercadoLibre Inc., Argentina’s biggest company by market value, may consider listing in its home market in a potential boon for the country’s exchange, which has lost major offerings to foreign bourses.

MercadoLibre could weigh going public in Argentina if a bill updating the country’s regulatory framework succeeds, said Chief Financial Officer Pedro Arnt. Latin America’s largest online marketplace, which has been listed on the Nasdaq since 2007, serves as a venue for vendors to sell everything from apparel to video games.

The government submitted a capital markets bill to Congress almost a year ago, which has been delayed with congressional discussions at a near-standstill ahead of Oct. 22 legislative elections. Among the most anticipated changes is a plan to repeal a clause in the current law that allows securities regulators to take over companies based on a minority shareholder’s complaint, and without a court order. 

"A new capital markets law, or a revision of the current regulatory framework, would open the doors for us to analyze a local listing," Arnt, said in an interview at the company’s headquarters outside of Buenos Aires. "While it’s not something MercadoLibre needs, we would look at it as a contribution to help foster the local capital market."

The bill will also allow for the regulation of derivatives and the creation of closed-end mutual funds, as well as provide rules to facilitate private wealth advising onshore. It’s among the reforms encouraged by market-friendly President Mauricio Macri, who scrapped capital controls and settled a 15-year long default since taking office in 2015.

The bill in congress provides "friendlier" regulatory framework for companies, which is likely to motivate others to open their capital and deepen the local market, said Juan Manuel Vazquez, head of equity research at Buenos Aires-based brokerage Puente. Argentina’s market capitalization of about $88 billion is equivalent to 11 percent of gross domestic product, compared with Brazil’s market cap of 39 percent and Colombia’s of 36 percent, according to data compiled by Bloomberg.

"Some companies chose to list overseas because when they opened their capital, demand was abroad and not onshore," Vazquez said. "It would be positive to see a company like MercadoLibre list locally as a sign of confidence in the local market."

Argentina’s benchmark Merval index is up 32 percent this year in dollar terms, recovering since June when MSCI Inc delayed a potential upgrade to emerging-market status. The benchmark index has 26 members, up from 10 when Macri took office. While average year-to-date turnover rose 55 percent in the benchmark index from 2016, stocks that have American Depository Receipts and local shares trade twice as much abroad, according to data compiled by the Instituto Argentino de Mercado de Capitales (IAMC).

"The reality is that Argentina’s capital markets today have low liquidity, and MercadoLibre is an incredibly liquid stock," Arnt added. "Given the right conditions, we will consider it and evaluate it."