StoneCo shares dip amid low Linx bids and Brazil market weakness

On Friday, shares of StoneCo (NASDAQ:STNE), a Brazilian financial technology company, declined following revelations that it has received multiple nonbinding offers for its software unit Linx that are below the purchase price from 2020. The decline also coincided with a broader weakness in Brazil’s stock market.

StoneCo’s acquisition of Linx in 2020 is now under scrutiny as the company considers bids for the unit. Despite having 20 potential bidders sign non-disclosure agreements to review sale details, only six have submitted non-binding offers. Among the interested parties are Brazilian software company Totvs SA and Canada’s Constellation Software (ETR:SOWGn), although Totvs has confirmed it has yet to make an offer.

The bids presented thus far have not met StoneCo’s expectations, with some being more than 50% lower than the acquisition price paid for Linx four years ago. However, sources indicate there are higher offers, and StoneCo is unlikely to sell the unit for significantly less than 5 billion reais.

StoneCo had previously engaged J.P. Morgan and Morgan Stanley (NYSE:MS) to facilitate the sale of Linx, as reported in September. The company has since confirmed employing advisors to explore options for its software business, though it has not set a deadline for the sale.

The tech firm is reportedly in a solid financial position, diminishing the urgency to sell Linx. This is further evidenced by StoneCo’s recent authorization of a share repurchase program valued at up to 2 billion reais.

The broader Brazilian market’s downturn ahead of the government’s tax reform announcement also contributed to StoneCo’s stock performance. The new proposal from Brazil’s government aims to expand income tax exemptions for lower-income citizens while increasing taxes for higher earners, alongside plans to reduce public spending in the future.

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