Taking a look at the deal, PagSeguro's (PAGS) up-sized 105.4 million share IPO priced at $21.50, above the $17.50-$20.50 expected range, raising $2.26 billion in gross proceeds. The deal was originally expected to consist of 92.1 million shares, so, in all, the IPO raised about 29% more than anticipated.
The lead underwriters included tier one firms Goldman Sachs and Morgan Stanley, which certainly didn't hurt its cause. Shares are expected to open later this morning on the NYSE.
PAGS is the provider of an "end-to-end" digital ecosystem which allows its customers to accept payments, and, to help them manage and grow their businesses. It specifically focuses on "micro-merchants" and small businesses because this segment is often over-looked and under-served by the large financial institutions.
In 2006, PagSeguro was launched as an online payment platform, providing the digital payment infrastructure that was necessary for e-commerce. It was backed by its parent company, Universo Online, giving it instant credibility and scale. Then, in 2013, it expanded from online payments into Point-of-Sale (POS) payments, giving merchants the ability to receive in-person payments. The company sells a variety of POS devices, spanning from its entry-level product called Minizinha, to its Moderninha Pro, its device with the most connectivity features.
A key distinguishing feature regarding its business model is that it sells these devices to its customers, rather than renting them. Customers typically use a 12-month installment payment program to complete the purchase. Of course, PAGS also charges transaction fees, making up 42% of its revenue in 2016.
PAGS customer base is highly diversified, which is not surprising given that it focuses on small un-banked merchants. As of September 30, 2017, its network totaled 2.5 million active merchants, spanning across all 26 states and the federal district in Brazil. General retail stores is its largest volume sector, but, still accounted for less than 15 of it total transaction business.
In its IPO prospectus, PAGS provided some preliminary results for 1Q17. Specifically, it is forecasting Total Revenue and Income of Rs 2.485-2.515, representing year/year growth of 119%. Net income for the year is expected to be between Rs170-Rs190 million. Further, is number of active accounts is expected to double to 2.8 million from 1.4 million in 2016.
Lastly, the balance sheet is in good shape with no long term debt and total current assets of $2.27 billion, prior to this offering.