StoneCo Signs $471M Investment Agreement With Banco Inter

Financial technology solutions provider StoneCo Ltd. (STNE) has entered into an investment agreement with Banco Inter, a digital bank in Brazil.

Stone enables merchants to carry out seamless transactions across different channels. Banco Inter acts as a service platform in Brazil providing banking, marketplace, credit, insurance, and investment services to about 10.2 million users.

Under the agreement, StoneCo will pick up a minority stake in Banco Inter for about $471 million by acquiring its newly issued shares in a follow-on public offering. The minority stake is limited to 4.99%.

Further, in the scenario of a change of control at Banco Inter, StoneCo will have the right of first refusal for a six-year period. StoneCo will also have the right to join the board of directors at Banco Inter. (See StoneCo stock analysis on TipRanks)

Interestingly, the two parties are also looking at ways to maximize value for each other by bringing together Banco Inter’s consumers and StoneCo’s merchants. These include connecting StoneCo merchants to InterShop, setting up a seamless mobile payment process, and providing consumers access to investment opportunities.

Last month, Citigroup analyst Gabriel Gusan lowered the stock’s rating to Hold from Buy but did not assign any price target. Gusan sees heightened competition in StoneCo’s small- to mid-sized segment and suggests waiting for a better entry point once competitive pressures recede.

Consensus among analysts is that StoneCo is a Moderate Buy based on 1 Buy and 2 Holds. The average analyst price target of $82 implies 30.2% upside potential.

Shares have gained about 135.9% over the past year.

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