SAO PAULO (Reuters) - BTG Pactual (BBTG11.SA) units rose on Thursday after completing the world's largest initial public offering this year, in a sign of investor confidence in Latin America's leading independent investment bank and its billionaire founder, André Esteves.
The units closed 0.6 percent higher at 31.45 reais ($16.68) from the 31.25 reais at BTG Pactual's IPO on Tuesday. The units, a mix of common and preferred stock of its investment banking and buyout divisions, had jumped as much as 4.3 percent in mid-afternoon trading.
Esteves, speaking at an event at the São Paulo Stock Exchange to mark BTG Pactual's trading debut, said the success of Brazil's first investment bank listing is "a vote of confidence in Brazil's capital markets by the global financial community."
The $1.96 billion IPO valued BTG at $14.5 billion, making it Brazil's 16th-biggest listed company. The bank could offer more shares within the next six to 12 months, bankers told International Financing Review, a Thomson Reuters publication specializing in capital markets.
"This is indeed a bet on the Brazil story," said Mohamed Mourabet, who helps manage about $1 billion in equities at Victoire Capital in São Paulo. "What might lure investors to this name is the fact that they have shown the skills and focus to differentiate themselves from other financial companies."
The offering, which gave investors the chance to buy into a fast-growing company with aspirations of rivaling global giants like Goldman Sachs Group Inc (GS.N), is also the world's biggest IPO so far this year, according to Edemir Pinto, chief executive of BM&FBovespa (BVMF3.SA), the owner of Brazil's sole exchange operator.
BTG Pactual's offering was also the nation's largest IPO since Banco Santander Brasil's (SANB11.SA) $7.5 billion offering in October 2009. Esteves said the deal would create space for other IPOs in Brazil and fan foreign interest in local markets.
More than 18.1 million units changed hands in Thursday's session, with BTG Pactual's brokerage actively propping up the stock through heavy purchases, traders said. Individuals were actively selling their holdings to pocket gains as demand from foreign institutional investors gained traction in the morning.
The rise in BTG Pactual units came on a day in which Brazil's benchmark Bovespa stock index .BVSP seesawed for most of Thursday's session. The index closed 0.7 percent higher.
The deal comes at a time when Brazil's once-hyped IPO market is struggling as an unpredictable economy and the risk of overpriced deals scares away investors. Last week, car rental company Locamerica (LCAM3.SA) became the first company to go public in Brazil since July.
The Locamerica deal priced below the target range, and prior to that three other attempted IPOs flopped because of market turmoil. By contrast, investors lined up for the BTG Pactual sale, hoping to tap into Esteves' success as a dealmaker.
BTG Pactual's successful debut is the first time that a new Brazilian listing rose in its first trading day since shares of home appliance retailer Magazine Luiza (MGLU3.SA) were floated on May 2, 2011.
BTG Pactual and Esteves himself have become symbols of Brazil's growing economic might, competing head to head with global investment banks in a country with bustling capital markets and promising growth outlook for the coming years.
"The BTG story will only work out so long as we keep working to make Brazil a more just country, with a stronger middle class," Esteves said to thundering applause from his partners and bankers involved in the deal.
Esteves, a 43-year-old mathematician who started as a computer technician at Banco Pactual at 21, rose to become managing partner and sold the bank to UBS AG UBSN.VX in 2006 for $3.1 billion. He and some partners bought back Pactual for $2.5 billion in 2009 and formed BTG Pactual.
At the ceremony in BM&FBovespa's old trading floor in downtown São Paulo, all BTG Pactual partners and employees attending were wearing royal blue ties resembling the bank's logo colors.
BM&FBovespa's Pinto said Esteves "is a visionary, a symbol of Brazil's new capitalism, a pioneer among a new breed of entrepreneurs."
Demand for BTG Pactual stock was over three times the amount of shares on offer, another source told Reuters before the deal was closed, indicating that investors shrugged off recent insider trading accusations against Esteves in Italy. Esteves, who denies the charges, plans to appeal.
The stock is trading at an estimated 2.3 times book value, according to analysts' estimates collected by Thomson Reuters, indicating that they are trading at a premium to older, more diversified banking groups in Brazil.
"The stock looks attractive, and might enjoy another rise in multiples, but it doesn't mean it's not expensive," said a São Paulo-based trader who spoke on the condition of anonymity.
That multiple could rise to 2.8 times as BTG Pactual expands operations across Latin America and sustains return on equity above the financial industry's average in Brazil, analysts noted.
On average, Latin American banks are trading at 2.3 times book value, while large Brazilian lenders - a proxy for BTG Pactual - are valued at 1.8 times, according to data by Raymond James & Associates.
Esteves said at the event that BTG Pactual could grow into a "regional champion" among investment banks and asset managers as competition mounts in Latin America. Regulatory changes planned for the Brazilian financial industry "are welcome," he added.
($1 = 1.8853 reais)
Reporting by Guillermo Parra-Bernal; Additional reporting by Asher Levine, Roberta Vilas Boas, Aluísio Alves and Paula Laier in São Paulo, and Joan Magee in New York; Editing by Lisa Von Ahn, Tim Dobbyn and Matthew Lewis