Portugal is preparing for its first initial public offering (IPO) in more than five years as the nation recovers from 10 quarters of contraction that has erased about 70 percent in market value.
The government will sell 70 percent of postal service CTT-Correios de Portugal next week, the first IPO since Energias de Portugal spun off its renewable-energy unit in June 2008.
Lisbon’s PSI-20 index has lost about e50 billion (R690bn) in market value since peaking in 2007 as index members dropped out and investors shunned a gauge composed of banks, utilities and construction companies stung by shrinking domestic demand.
Portugal is counting on the offering to reduce debt and narrow its budget deficit as the third-most indebted member of the euro zone seeks to meet EU targets. The nation plans to exit a rescue package in June next year after it became the third country to ask for an EU-led bailout almost three years ago, as soaring bond yields forced it out of the borrowing market.
State holding company Parpublica is selling as many as 105 million shares in CTT, the national postal service, at e4.10 to e5.52 apiece, according to a prospectus. Trading is due to start on December 5. Demand had reached more than six times the amount on offer, Portugal said this week.
Teis Knuthsen, the chief investment officer at Saxo Bank’s private banking unit, said last week: “An IPO would be a constructive thing to see for a market which has lagged.”
Portugal’s benchmark index has risen 15 percent this year, less than all developed European gauges except Austria and the UK. Greek stocks have rallied 30 percent and Ireland’s have gained 32 percent.
Portugal’s stock exchange, valued at $82.5 billion, is less than half the size of Ireland’s.
The nation negotiated a e78bn bailout in 2011 with the European Commission, the European Central Bank and the International Monetary Fund as it began to run out of funds and lost access to the bond market. In exchange, the country had to increase taxes, reduce state spending and sell assets.
Portugal, which still has to trim spending by e3.2bn next year to meet budget deficit targets, is seeking to reduce its shortfall to 4 percent of gross domestic product next year and to 2.5 percent in 2015, according to Finance Minister Vitor Gaspar.
Portugal’s economy expanded 1.1 percent in the three months to June, the first quarter-on-quarter growth since 2010.
“The future is looking rosier,” Bruno del Ama, the chief executive of Global X Funds, said. “We’ve had hedge funds enquire about access products for Portugal, and this smart capital is a positive indicator of what may come for the equity market. A company deciding to IPO now is a big vote of confidence in the economy.” – Bloomberg