Casas Bahia (BHIA3) dissolves in the first trading session after the reverse split. What to expect from the shares?

The actions of Casas Bahia (BHIA3) fell more than 10% on Friday in its first trading session after the company split in a 25-to-1 split. The stock, which was worth R$0.50, had fallen 81% in 2023 and 17% in the month, and is now trading at R$11.17. In the latest Ibovespa rebalancing preview report for January 2024, the XP strategy team recalled that BHIA3 stock was at strong risk of exclusion from the main B3 indexes. What can you expect with the reverse split from the retailer’s shares?

OR Ibovespa, XP points out in a report last Friday (15), the main index of the Brazilian Stock Exchange, “acts as a thermometer of the local market by bringing together the shares with the highest marketability index on B3”. To be part of the index, “the security must also meet the criteria of market presence and financial volume and cannot be penny stocksthat is, an asset whose price is less than R$ 1.00.

“This risk arises from the Penny Stock criteria, which could result in significant selling pressure on stocks from index-associated funds,” the report said.

According to the XP team, the reverse stock split of Casas Bahia “could be a key step in solving this problem and protecting the company’s position in these indexes.”

With this shot on Friday BHIA3 documentsthe worry returns: was it a scare or the retailer actions do they tend to recover?

Here’s what analysts say about XP: “We maintain a more cautious outlook for the Casas Bahia Groupwith a neutral recommendation and a target price of R$17.7 per share, as we believe the company will face challenges.”

The analytics team cites the following obstacles:

• fierce competitive environment;
• still high interest rates and compressed purchasing power; AND
• execution risks in the company’s transformation plan.

But XP believes: “As we highlighted in the Where to Invest 2024 report, we are more constructive for the retail sector next year, as we expect a recovery in consumption resulting from an improvement in disposable income and consumer debt levels thanks to lower interest rates, controlled inflation and a more normalized credit supply.

More: “Investor expectations are very conservative relative to the sector and positioning is very light. ICMS tax benefits in IR are expected to be virtually eliminated or reduced from 2024 onwards, compromising earnings growth or requiring transfers of price to offset the effect, but the “A decision on this issue should remove an important uncertainty that has weighed on the sector. Finally, interest cuts may be slower or smaller depending on macro/external risks.”

Free fall movement before grouping

According to BB Investimentos, in a report published on November 9, the BHIA shares3 “have been in free fall since mid-2H 2022, accumulating a write-down of nearly 80% this year, amid uncertainty over the company’s ability to resolve its internal issues and return to profitable growth.” And he adds: “The company had already given a negative signal to minority shareholders about its financial situation after the conclusion of the subsequent share offer (follow on) in September, when it had accepted a discount of almost 60% on the pre-follow on” for a title already heavily discounted.”

The presentation of worse than expected results in 3Q23 by Casas Bahia, underlines BB-BI, “adds another warning point on the speed and intensity of the company’s recovery once the transformation process is completed (estimated for the end of 2024), as well as the cost that this process will still impact on Casas Bahia’s performance in the coming quarters.”

And he concludes, a month before the Casas Bahia shareholding group“We have chosen to downgrade our recommendation to Sell, as we believe it is more appropriate not to take the risk of turning around a company whose risk of negative reviews has increased, regardless of the current appreciation potential of our target price.”

Casas Bahia: “The market’s distrust towards the company”

According to the company, an investment vehicle “linked to a member of the company’s management” will donate the necessary shares to complete the portfolio of shareholders who hold no multiple of 25 shares of the retailer.

Therefore, shareholders who do not have a volume of BHIA shares3 multiples of 25 will have no fractional shares after the reverse split. “In this way, the reverse split will be operationalized and implemented in such a way as not to alter the proportional participation of shareholders in the share capital of the company and not to affect the patrimonial and political rights of the shares,” Casas Bahia assured the market.

For Fábio Lemos, partner at Fatorial Investimentos, the market was already expecting this movement and, although the currently outlined scenario of falling interest rates is favorable for the company, there is still a lot of mistrust about the retailer’s recovery.

“The consumption data released recently have not brought any improvement to the sector, which is still waiting for some type of stimulus to encourage purchases, especially of household appliances. Furthermore, the day chosen for the expiry of the options in B3 (B3SA3), which is more volatile, should be observed,” he stressed.

End of the risk of leaving Ibovespa?

Currently composed of Casas Bahia shops and Ponto (formerly Ponto Frio), the e-commerce Extra.com.br and the furniture manufacturer Bartira, the Casas Bahia Group recently faced a risky situation: the exit from the main index of the Brazilian stock exchange, Ibovespa.

In the first preview of Ibovespa in 2024 (January to April) exclusion of BHIA3 documents – and the contribution of ISA Cteep electricity (TRPL4).

In a relevant fact published on December 8, the Casas Bahia demonstrated that early reverse stock split is one of the measures to avoid leaving stock selection in the index.

“With this, the company’s management hopes that its shares will once again meet the selection criteria to be part of the Ibovespa, B3 index, in the rebalancing at the end of this year, 2023,” reads the text of the reseller.

In this race against time, the new procedure should favor the share negotiations of the former group and relaunch the company’s stock. Casas Bahia (BHIA3), the statement reads.

Source: Terra

Rose

Rose James is a Gossipify movie and series reviewer known for her in-depth analysis and unique perspective on the latest releases. With a background in film studies, she provides engaging and informative reviews, and keeps readers up to date with industry trends and emerging talents.