They were one of the last to throw themselves into the capital market’s arms. Seduced by an extremely attractive business environment, with a fertile demand for real estate and a promising future, in June 2007 the Zarzur family sold part of EZtec, a construction and real estate consolidation company, on the stock exchange. They exchanged 33% of their capital for R$ 542 million, which went straight into the company’s coffers and would later support an expansion plan. The shares started out quoted at R$ 11, right in the middle of the stipulated initial price range of R$ 9 to R$ 12. They reached their peak at R$ 13.80, but on Friday, October 3, closed at R$ 2.38.

Their downward trajectory during the past months made EZtec a highlighted downtrend in the Magnifying Glass section. “We have excellent margins”, retorts João Pessoa, Investor Relations manager. “While the market has a net margin of 18%, EZtec’s margin is 36%”, he says, based on the balance sheets of 21 construction companies listed at Bovespa. So, what happened for their shares to plummet so sharply?

The executive makes it clear that EZtec is not an adventurous company. Therefore, they did not enter the stock market simply to ride the IPO wave. What happened, according to him, was a scenario inversion, suffocated by the international crisis. In August, his two largest shareholders beat a retreat. One of them, which held more than 10% of stocks, is American fund Gavião. The other, an unrevealed European fun, had a smaller interest. “Their departure (by selling their stocks in the exchange) ended up not reflecting our good results”, he affirms.

The market, however, does not see EZtec in the same way. Albeit traditional in the business and having a solid history, the company felt the blow of ill fate on some of its best projects. Since late last year, they have had problems with the Guaratuba Residence Resort luxury development, to be built on the São Paulo coast. Ibama [Brazilian Institute for Environment and Natural renewable Resources] is complaining they have no environmental permit and the Federal Court embargoed the works at the beginning of the year, claiming that the condominium is located in a marine area of permanent preservation. The coastal zone is considered national patrimony by the Federal Constitution. João Pessoa says that the company is trying to work out the situation. The plot of land– bought at a public auction – already housed Senai’s [Brazilian National Industrial Training Service] former Training Center, built in the 1990s.

EZtec also fought an arduous battle for its Bandeirante project, located in the district of São Domingos. The project is being carried out in partnership with American real estate developer Tishman Speyer, one of the largest in the world and owner of urban icons like the Rockefeller Center and the Chrysler Building in New York. The Bandeirantes project will include 18 towers and a shopping mall. The item of discord was the area having been considered of public use. In March, however, the quarrel was resolved. The project, which was discussed at a public hearing, will be developed and later undergo the approval procedure at City Hall.

In an attempt to improve the company’s performance and cover it in a sweeter glaze, EZtec themselves started buying back their own shares in the market. In August, the company acquired 3.4 million shares at an average price of R$ 3.51 each. Altogether, 4.5 million were already bought back, at an average price of R$ 3.72 per share. But, to do them justice, EZtec is not the only company in the industry going through hard times. Most construction companies who put out an IPO are swimming against this unfavorable tide. Depreciation of their shares has been superlative.

What we are now seeing is a rearrangement of the market. Concentration through mergers and acquisitions has been taking place in the past two months and will become increasingly inevitable. One of the reasons for this, as industry consultants remind us, is that the Brazilian market cannot support that many public companies. The country has 21 construction companies listed at Bovespa.

In the market’s betting exchange, EZtec may be among those who will undergo a merger. Some say that a union with Agra or Even is on its way. Playing the role assigned to him, João Pessoa denies this, saying that the company is in a phase of recovery and far from closing any such deal.