Latin America’s Unicorns Not Immune from Wall Street Share Crash

Shares commonly referred to as ‘growth’ stocks due to their future potential did experience strong growth between 2020 and 2021, but the scenario has reversed in 2022, in a context of tighter global liquidity. And listed Latin American unicorns have not been immune to the headwinds blowing this year in the markets.

Some of these innovative companies whose value exceeds $1 billion (after which a company is classified as a unicorn) have shown declines of up to 50% so far this year in their American Depositary Receipts (ADRs).

Bloomberg Línea conducted a survey of how the shares of eight emblematic unicorns have fared between December 31, 2021 and May 13, 2022.

MercadoLibre

The Argentine online marketplace was the first Latin American unicorn to be listed on Wall Street, going public in 2007. Its growth since then has been significant. Fifteen years ago each of its shares was worth $28.50 and today have a price of $794.96. However, 2022 has not been positive for the stock.

From December 31, 2021 to date, MercadoLibre Inc (MELI) shares have lost more than 41%, as they had started 2022 at $1,348.40 per share.

The value of the company founded by Marcos Galperin had soared almost 193% during 2020, in line with other e-commerce companies’ performance. However, in 2021 its shares closed with a 19.5% decline.

Globant

Argentine IT giant Globant (GLOB) had been another of the big winners of the pandemic. In 2020 the price of its stock had swelled by over 105% and in 2021 it had a more than 44% increase.

However, like MercadoLibre, Globant has not escaped the correction suffered by growth stocks and in 2022 it has fallen by 40.5%, which places it at around $186.73 per share. As of December 31, 2021, its shares were worth $314.09.

However, and also like MercadoLibre’s, Globant’s stock is still well above the price it was at before the 2020 lockdowns began.

Nubank

The Brazilian digital bank Nubank (NU) has been listed on the NYSE since December last year, going public at a difficult time for this type of company.

From the last day of 2021 to the present, Nubank shares have fallen more than 48.6%, and their price stands at $4.82, having started the year with a value of $9.38 per share.

Nubank had started trading on the NYSE on December 9 with a price of $11 per share.

dLocal

The company dLocal LTD (DLO), which provides the ability to make cross-border payments connecting global merchants with emerging markets, is the first Uruguayan startup to become a unicorn and had its initial public offering on Wall Street in June 2021.

At that time it had a price of more than $31 per share.

In 2022, its share has fallen by more than 41.8% compared to their value at end-2021, and its shares are currently worth $20.77.

PagSeguro

Brazilian startup PagSeguro LTD (PAGS) is a financial services and digital payments company founded in 2006 and publicly traded in the United States since the end of January 2018.

In February 2021, the company’s shares had reached a value of over $61.92 and from that price to the closing price on May 13 ($13.47) the shares have lost more than 78%.

StoneCo

Another Brazilian startup whose stock has been suffering the inclemencies of 2022 is StoneCo LTD (STNE). This firm provides financial technology solutions made its debut on Wall Street in October 2018, with a share price above $31.

In February 2021, its shares had surpassed $94, in the heat of the growth of technological companies during the coronavirus. But from that peak to their current value ($8.72), the shares have slid 90.7%.

Meanwhile, in 2022 their price has slipped further, by 48.3% compared to December 31, 2021.

VTEX

Another Brazilian startup that lists on Wall Street is VTEX, which specializes in cloud commerce.

Its IPO on Wall Street took place towards the end of July last year, with a starting price of over $25 per share, and which are now worth $4.63.

As with the aforementioned companies, it has been stumbling strongly this year and its loss in value is 56.8% so far in 2022.

But the loss in value is much more accentuated when compared to the maximum price that the shares reached: in August 2021 they had climbed to $32.35 and are now down 85.7% compared to that peak.

Despegar.com, the Softest Crash

Shares of the Argentine online travel agent unicorn specializing Despegar.com Corp (DESP), fell 8% in dollar terms from the close of 2021 to today. They are currently at $8.99, while they stood at $9.79 at the end of last year.

Why did it decouple from the rest of the unicorns? Despegar.com is within the travel sector, which was one that suffered the most during the pandemic, and its performance therefore obeys a different logic to the others in this list.

But the fall is less sharp if we take into account that between 2017 and 2018, when market expectations in Argentina were favorable for this type of companies, Desegar’s shares dropped by around $35.

The Context

Companies that are considered growth companies, including Latin American unicorns, came out of a very positive 2019 and still soared phenomenally throughout 2020, supported by the liquidity injected during the pandemic and the extra attractiveness of many of these stocks in a context of bull run.

Those unicorns’ share values continued to rise during part of 2021, until the correction hit them all, such is the case of VTEX, PagSeguro or StoneCo.

MercadoLibre, although it fell in 2021 and continues to plummet in 2022, is still well above its value before the arrival of the coronavirus. In contrast, StoneCo’s shares today cost one-fifth of what they did before the lockdowns, and so not only lost the value it held during the pandemic, but is now far worse off than it was before Covid-19.

Why Are They Falling?

“There is definitely a macro movement that is hitting all stocks with a growth profile at the moment, that is, it is not a geographical issue that is particularly affecting Latin American companies”, according to Pablo Haro, personal finance and distribution manager of Grupo SBS.

He says that what has had the greatest impact is the market’s fear of rising interest rates and a cut in flows to businesses that are not profitable today, but are expected to be profitable in the future.

“For companies that need capital to continue developing their businesses, the outlook is a bit more complicated,” he warned.

Similarities can be found with what happened with the emblem of the technological bet on pandemic: the exchange-traded fund ARKQ, a symbol of technological innovation, which has lost more than 30% this year and today is worth 42% less than it did at its peak in November 2021

Something similar is happening with the Nasdaq index, which has declined by close to 25% so far this year.