(Adds source, details on pricing, book, share performance throughout)
By Paula Arend Laier and Guillermo Parra-Bernal
SAO PAULO, April 5 (Reuters) - Qatar Investment Authority's sale on Wednesday of a 2.25 percent stake in Banco Santander Brasil SA priced below initial estimates, three people with direct knowledge of the deal said, reflecting the view that shares of Brazil's No. 4 listed lender remained expensive.
According to the sources, who asked for anonymity because results of the deal are not public, investors agreed to pay 25 reais per unit of Santander Brasil in the so-called restricted efforts offering. QIA and banks underwriting the deal had initially suggested a 27-real price tag, the people said.
At 25 reais, QIA placed the entire 80 million units of Santander Brasil offered to domestic and global investors, the sources said. Investors, who initially balked at the suggested tag and pushed back for a lower price, placed bids worth between 2.5 times and three times the amount of units QIA had put on offer, the sources said.
QIA took advantage of an 18-month long rally that doubled the price of Santander Brasil's units to cash out, after seven years as the bank's No. 2 shareholder. Investors were puzzled by that jump, which made Santander Brasil Latin America's most expensive bank and spurred increased short-selling bets against the stock.
Santander Brasil, as well as underwriters Bank of America Merrill Lynch and Credit Suisse Group AG, did not have an immediate comment. QIA could not be reached for comment.
Wednesday's transaction was the latest equity follow-on offering in Brazil this year, underscoring how government efforts to cut spending and pull the economy out of a three-year recession have rekindled investor confidence. Companies have raised more than 10.5 billion reais this year through share offerings in the year through April 5, a two-year high.
The offering probably fetched up to 2.3 billion reais ($745 million) for QIA, provided it chose to exercise an additional allotment of 12 million units, according to Thomson Reuters calculations.
The units - a blend of Santander Brasil's common and preferred shares - accelerated losses on news of the investor pushback and shed as much as 5.2 percent to 26.13 reais, the lowest price since late December. The stock shed 15 percent since March 27, the day before the offering was announced.
The transaction, known as a public offering with restricted efforts, differs from standard equity offerings in that QIA does not have to request registration of the plan with securities industry watchdog CVM. Only qualified investors can participate, and the deal cannot be marketed through road shows or the media.
Santander Brasil is the local unit of Spain's Banco Santander SA.
($1 = 3.0937 reais) (Additional reporting by Ana Mano in São Paulo; Editing by Richard Chang and Bill Trott)