The B3 (in full, B3 - Brasil Bolsa Balcão S.A.), formely BM&FBOVESPA, is a stock exchange located at São Paulo, Brazil. At the end of 2011 it had a market capitalization of R$2.37 Trillion, making it the 13th largest stock exchange in the world. However, due to the slump in economic growth in Brazil associated with political problems, in addition to the strengthening of the U.S. Dollar to the Brazilian Real, the capitalization shrank to R$2.21 trillion by the end of 2015.

 

On May 8, 2008, the São Paulo Stock Exchange (Bovespa) and the Brazilian Mercantile and Futures Exchange (BM&F) merged, creating BM&FBOVESPA. Then at March 30, 2017, BM&FBOVESPA merged with CETIP, creating the B3. 

The B3 is comprised of five market segments:

  1. Bovespa Mais

  2. Bovespa Mais Nivel 2

  3. Novo Mercado

  4. Nivel 1

  5. Nivel 2

Bovespa Mais:

BM&FBOVESPA created Bovespa Mais to help develop the Brazilian equity market. Bovespa Mais was created for companies that want gradual access to the formal market, the purpose of this segment is to foster growth among small and midsize companies via the capital market. A gradual access strategy grants adequate preparation time for your company while simultaneously showcasing it to the market, and increasing your visibility among investors.

Bovespa Mais allows smaller fundraising operations than the Novo Mercado, which are more appropriate for financing your growth projects. Companies listed on Bovespa Mais tend to attract investors who see more accentuated development potential in the business. Share offers can be targeted to select investors who tend to view return as a medium to long term matter.

Bovespa Mais also allows listings without an offering, meaning you can list your company on the Exchange and have up to seven years to hold the IPO. This is ideal for companies that wish to access the market gradually. You can work on the professionalization of your business with a view to the listing alone, and afterwards have more time to hold the public offering. Detaching one moment from the other means access to the market tends to be easier and your company’s preparedness higher.

Companies listed on Bovespa Mais are exempted from the registration fee (a fee BM&FBOVESPA charges for the registration of companies) and receive a gradual discount on the listing maintenance fee, being 100% in the first year.

Companies listed on Bovespa Mais commit to a high standard of corporate governance and transparency with the market.

Bovespa Mais Listing Requirements:

  • Characteristics of the Shares Issued:

    • ​Allows only common stock

  • Minimum percentage of outstanding shares (free float):

    • ​25% free float until the 7th year of listing

  • Public distributions of shares:

    • ​There is no regulation

  • Prohibition to statutory provisions:

    • ​Qualified quorum and "immutable clauses"

  • Composition of the Board of Directors:

    • ​Minimum of 3 members (according to law), with unified term of up to 2 years

  • Prohibition of accumulation of positions:

    • ​There is no regulation

  • Composition of the Board of Directors:

    • ​There is no regulation

  • Financial Statements:

    • ​As per legislation in force

  • Annual public meeting:

    • ​Optional

  • Calendar of corporate events:

    • ​Mandatory

  • Additional disclosure of information:

    • ​Securities negotiation policy

  • Grant of tag-along rights:

    • ​100% for common shares

  • Tender offer of share purchasing for at least their economic value:

    • ​Compulsory in case of registration canceling or segment exit, except if there is migration to Novo Mercado

  • Becoming a Member of the Market Arbitration Chamber:

    • ​Mandatory

Bovespa Mais Nivel 2:

BM&FBOVESPA created Bovespa Mais Nível 2 to contribute to the development of the Brazilian equities market. Created for companies that want to access the market gradually, this segment seeks to foster the growth of small and medium sized companies via the capital market. The gradual access strategy allows your company to prepare adequately while simultaneously showcasing to the market, thereby increasing your visibility among investors.

Bovespa Mais Nível 2 allows offerings that are smaller than those on the Novo Mercado and which are sufficient to finance your growth project. Companies with equities admitted for trading on Bovespa Mais Nível 2 tend to attract investors seeking a more accentuated business development potential. Equity offerings may be destined towards select investors and they generally have medium to long term return prospects.

The Bovespa Mais Nível 2 segment allows the company to be listed, with preferred and ordinary shares admitted for trading, without there being an offering as the firm has up to seven years to hold the IPO. This is ideal for companies that wish to access the market gradually. You can work on the professionalization of your business with a view to the listing alone and afterwards have more time to hold the public offering.

Detaching one moment from the other means access to the market tends to be easier and your company’s preparedness higher.

Companies listed on Bovespa Mais Nível 2 are exempted from the registration fee (a fee BM&FBOVESPA charges for the registration of companies) and receive a gradual discount on the listing maintenance fee, being 100% in the first year.

Companies listed on Bovespa Mais Nível 2 commit to a high standard of corporate governance and transparency with the market.

Bovespa Mais Nivel 2 Listing Requirements:

  • Characteristics of the Shares Issued:

    • ​Allows common and preferred stock

  • Minimum percentage of outstanding shares (free float):

    • ​25% free float until the 7th year of listing

  • Public distributions of shares:

    • ​There is no regulation

  • Prohibition to statutory provisions:

    • ​Qualified quorum and "immutable clauses"

  • Composition of the Board of Directors:

    • ​Minimum of 3 members (according to law), with unified term of up to 2 years

  • Prohibition of accumulation of positions:

    • ​There is no regulation

  • Composition of the Board of Directors:

    • ​There is no regulation

  • Financial Statements:

    • ​As per legislation in force

  • Annual public meeting:

    • ​Optional

  • Calendar of corporate events:

    • ​Mandatory

  • Additional disclosure of information:

    • ​Securities negotiation policy

  • Grant of tag-along rights:

    • ​100% for common shares & Preferred Shares

  • Tender offer of share purchasing for at least their economic value:

    • Compulsory in case of registration canceling or segment exit, except if there is migration to Novo Mercado or Nível 2

  • Becoming a Member of the Market Arbitration Chamber:

    • ​Mandatory

Novo Mercado: 

 

Novo Mercado is a listing segment designed for shares issued by companies that voluntarily undertake to abide by corporate governance practices and transparency requirements in addition to those already requested by the Brazilian Law and CVM (Brazilian Securities and Exchange Commission).

It is based on the premise that stock valuation and liquidity are positively impacted and assured by shareholder’s rights, and by the quality of companies´ information.

The admission to Novo Mercado implies the compliance with corporate rules, known as "good practices of corporate governance", which are more rigid than those required by the current legislation in Brazil.

These rules, consolidated in the Listing Regulation, increase shareholder's rights and enhances the quality of information commonly disclosed by companies. Additionally, the Market Arbitration Panel for conflict resolution between investors and companies offers a safer, faster and specialized alternative to investors.

The main innovation of Novo Mercado concerns the capital stock, which must be solely represented by common shares (voting shares). In brief, publicly-held companies listed on Novo Mercado have the following additional obligations:

  • Public share offerings have to use mechanisms to favor capital dispersion and broader retail access.

  • Maintenance of a minimum free float, equivalent to 25% of the capital.

  • Same conditions provided to majority shareholders in the disposal of the Company’s Control will have to be extended to all shareholders (Tag Along).

  • Establishment of a two-year unified mandate for the entire Board of Directors, which must have five members at least, of which at least 20% (twenty percent) shall be Independent Members.

  • Disclosure of annual balance sheet, according to standards of the IFRS.

  • Improvements in quarterly reports, such as the requirement of consolidated financial statements and special audit revision.

  • Obligation to hold a tender offer by the economic value criteria, in case of de-listing or cancellation of registration as publicly-held company.

  • Compliance with disclosure rules in trades involving securities issued by the company in the name of controlling shareholders.

  • Some of these obligations must be approved at the General Shareholders Meetings and included in the corporate bylaws.

Novo Mercado Listing Requirements:

  • Characteristics of the Shares Issued:

    • ​Allows only common stock

  • Minimum percentage of outstanding shares (free float):

    • ​At least 25% free float

  • Public distributions of shares:

    • ​Share dispersion efforts

  • Prohibition to statutory provisions:

    • ​Limitation of less than 5% of the voting capital, qualified quorum and "immutable clauses"

  • Composition of the Board of Directors:

    • ​Minimum of 5 members, of which at least 20% must be independent with unified term of up to 2 years

  • Prohibition of accumulation of positions:

    • Chairman of the Board and Chief Executive Officer or Chief Executive by the same person (a grace period of 3 years from accession)

  • Composition of the Board of Directors:

    • ​Demonstration on any public offer for the acquisition of company shares

  • Financial Statements:

    • ​Translated into English

  • Annual public meeting:

    • ​Mandatory

  • Calendar of corporate events:

    • ​Mandatory

  • Additional disclosure of information:

    • Securities negotiation policy and code of conduct

  • Grant of tag-along rights:

    • 100% for common shares

  • Tender offer of share purchasing for at least their economic value:

    • Compulsory in case of registration canceling or segment exit

  • Becoming a Member of the Market Arbitration Chamber:

    • ​Mandatory

Nivel 1:

BM&FBOVESPA sets a series of standards for the conduct of companies, managers and controlling shareholders considered as important for valuation of shares and other assets issued by the company. The adherence to these practices distinguishes a company as either Companhia Nível 1 (Level 1 Company) or Companhia Nível 2 (Level 2 Company), depending on the degree of commitment assumed by the company.

The adherence to BM&FBOVESPA's "Special Corporate Governance Levels" better advertises the efforts of the company to improve the relation with its investors and increases the potential for appreciation in asset value. 

Companhias Nível 1 largely undertake to improve methods of disclosure to the market and to disperse their shares among the largest number of shareholders possible. Thus, the principal practices required of a Companhia Nível 1 are:

  • Maintenance of a free-float of at least 25% of the capital;

  • Public offerings have to use mechanisms to favor capital dispersion;

  • Improvement in quarterly reports, including the disclosure of consolidated financial statements and special audit revision;

  • Monthly disclosure of trades involving equities issued by the company on the part of the controlling shareholders;

  • Disclosure of an annual calendar of corporate events.

Nivel 1 Listing Requirements:

  • Characteristics of the Shares Issued:

    • ​Allows common and preferred stock (as per legislation)

  • Minimum percentage of outstanding shares (free float):

    • ​At least 25% free float

  • Public distributions of shares:

    • ​Share dispersion efforts

  • Prohibition to statutory provisions:

    • ​There is no regulation

  • Composition of the Board of Directors:

    • ​Minimum of 3 members (according to law), with unified term of up to 2 years

  • Prohibition of accumulation of positions:

    • Chairman of the Board and Chief Executive Officer or Chief Executive by the same person (a grace period of 3 years from accession)

  • Composition of the Board of Directors:

    • ​There is no regulation

  • Financial Statements:

    • ​As per legislation in force

  • Annual public meeting:

    • ​Mandatory

  • Calendar of corporate events:

    • ​Mandatory

  • Additional disclosure of information:

    • Securities negotiation policy and code of conduct

  • Grant of tag-along rights:

    • 80% for common shares (as per legislation)

  • Tender offer of share purchasing for at least their economic value:

    • As per legislation in force

  • Becoming a Member of the Market Arbitration Chamber:

    • ​Optional

Nivel 2:

To be classified as a Companhia Nível 2, in addition to the obligations of Nível 1, the company and its controlling shareholders must adopt and observe a much broader range of corporate governance practices and minority shareholder rights. In brief, the criteria for listing as a Companhia Nível 2 are:

  • Establishment of a two-year unified mandate for the entire Board of Directors, which must have five members at least, of which at least 20% (twenty percent) shall be Independent Members;

  • Disclosure of annual balance sheet according to standards of the IFRS;

  • In case majority shareholders sell their stake, same conditions granted to them must be extended to common shareholders, while preferred shareholders must get, at least, 100% of the value/conditions (tag along);

  • Voting rights granted to preferred shares in circumstances such as incorporation, spin-off and merger and approval of contracts between the company and other firms of the same holding group, when deliberated at general meeting.

  • Obligation to hold a tender offer by the economic value criteria, in case of de-listing or de-registration process;

  • Admission to the market arbitration panel for resolution of corporate disputes.

Nivel 2 Listing Requirements:

  • Characteristics of the Shares Issued:

    • ​Allows common and preferred stock (as per legislation)

  • Minimum percentage of outstanding shares (free float):

    • ​At least 25% free float

  • Public distributions of shares:

    • Limitation of less than 5% of the voting capital, qualified quorum and "immutable clauses"

  • Prohibition to statutory provisions:

    • ​Limitation of less than 5% of the voting capital, qualified quorum and "immutable clauses"

  • Composition of the Board of Directors:

    • Minimum of 5 members, of which at least 20% must be independent with unified term of up to 2 years

  • Prohibition of accumulation of positions:

    • Chairman of the Board and Chief Executive Officer or Chief Executive by the same person (a grace period of 3 years from accession)

  • Composition of the Board of Directors:

    • ​Demonstration on any public offer for the acquisition of company shares

  • Financial Statements:

    • Translated into English

  • Annual public meeting:

    • ​Mandatory

  • Calendar of corporate events:

    • ​Mandatory

  • Additional disclosure of information:

    • Securities negotiation policy and code of conduct

  • Grant of tag-along rights:

    • 100% for common and preferred shares

  • Tender offer of share purchasing for at least their economic value:

    • Compulsory in case of registration canceling or segment exit

  • Becoming a Member of the Market Arbitration Chamber:

    • ​Mandatory

Mr. Steve Muehler

Founder & Managing Member

Private Placement Markets

101 California Street

San Francisco, CA 94111

Email: Steve@PPMSecurities.com

Phone: (877) 259-8066

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