70 million shares will be issued for an estimated R$150 million.
I think that is about 20% of the float.
Finally some answers. The deal made was 14% dilution with each share issued TO ALPHAVILLE valued at R$5.11. Its not finalized yet though because it has to be approved by Alphaville holders who are looking for 90 million shares valued at R$3.70 (18% dilution).
Of course nothing is set in stone yet, but it looks safe to say that Gafisa's cash stock will remain intact and maximum dilution risk is less than 20%.
This is coming from Brazil's finest financial publication. VERY good news to say the least.
432 million shares of Gafisa pre-dilution.
Assuming a PPS of R$2.60, market cap is R$1.123 billion.
Independently assessed value for 20% Alphaville stake: R$359 million
Current agreement: 70 million shares will be issued at R$5.11 (14% dilution)
Alphaville holders want: 90 million shares at R$3.70 (17% dilution)
Given current assessed valuation, GFA’s 80% stake of Alphaville is worth R$1.4 billion.
Zell reportedly offered R$700 million for Gafisa and Tenda in March.
Working from these estimates alone, the company is worth R$2.1 billion.
R$4.86/share x 432 million shares = R$2.1 billion.
Its hard to imagine that Gafisa management will accept anything less than that. A 50/50 compromise with Alphaville holders would be R$4.40/share.
FYI, I love your article linked to above. Agree with your observations.
"To give you an idea, besides produce, university tuition costs, and healthcare (sort of), I literally can't think of anything in Brazil that is cheaper than the US now (even after converting to USD). Beer is about the same price (prior to 2008 it was always cheaper). My brother-in-law and some friends who have comparable jobs to mine earn about the same in BRL as I do in USD. I honestly don't know how the middle or upper middle class can squeek by."
I also don't understand how any middle class affords Brazil anymore.
Brazil is investing billions and billions ($100 billion?) into offshore oil. This creates and will sustain jobs for decades. I know people who couldn't find a job for years in Brazil and are now working in some capacity for the oil industry. Pay is not great, but at least they can feed their family.
The best real estate in Brazil now is in the cities where the oil workers need to live or will live in the future (some cities are still being developed). There is absolutely no bubble in most of these developments, because it's more of a local market and much of it is pre-construction. Foreign speculators are nearly completely absent and there is no flipping (like there was in the US). These are completely new cities that are springing up and they will have population growth for the rest of our lives. I don't see how you can lose investing in real estate in these new "petrol" cities, if you invest prudently and look for deals.
yes, thanks. i am working off local data. seems to be that it's not unreasonable to see R$0.25/shr maybe R$.30/shr FTM or so. i think basically with the ADRs rocking today, we are going to see this back at $3 very soon. China's rate cut today is exceptionally bullish for Brasil and latam so expect some FX tailwinds as well.
Its not just Brasilia. Check out Santa Catarina, Manaus, or any major city in the NE. Even secondary cities in relatively rural Goias are hopping.
I disagree again about employment staying strong. First, the last couple of reports have shown a softening. Down-trending commodity demand from China, India, and the Brazilian automobile sector in particular will impart a heavy toll regardless of domestic infrastructure buildouts.
"Gafisa doesn't need real estate prices to go up to make money"
The good news is that RE constructors across the board are cutting back on project buildouts. The main problem they have all shared in the past several years has been rising labor costs and severe shortages of skilled labor which cut into margins. With demand for labor ebbing, decreased wages paid/unit built will pad the bottom line even as revenues fall.
What sectors of RJ are you referring to as being cheap? My favorite sectors of the city were always Barra de Tijuca, Jardim Botanico, and Vargem Grande. What's your connection to Rio?
Perhaps you are right. I don't follow Brasilia. Just mainly Rio. But, I can tell you that real estate in certain parts of Rio (estado, not cidade) is really not that expensive. High end apartments in Rio cidade, Zona Sul, are absurd, I agree. But, other housing projects are not. Basically I do not think there is a bubble everywhere. Plus, Gafisa doesn't need real estate prices to go up to make money, as long as they are stable and flat for five years, they will be fine. The main thing is employment. If employment stays high in Brazil, housing will absolutely not collapse. And I think employment will stay strong in Brazil for many years, given the major infrastructure work.
Now that I disagree with your assessment there. There a still a RE bubble on a national scale, but with all the added stimulus kicking in from the government, prices could plateau for a few more years before serious declines occur.
The bubble also extends way outside of RJ and SP. Brasilia in particular is off the charts, and some hotspots in the Northeast will suffer an Arizone-like fate as the commodity boom continues to fade.
I have debated this ad-nauseum, but here is my take on the subject.