StoneCo’s Acquisition of Linx: Evaluating the Reflected Market Expectations

Market Response to StoneCo's Recent Developments

StoneCo's latest announcements have highlighted a noticeable difference between investor expectations and actual events. The sale of Linx was anticipated, as the agreement was made public in July 2025, giving stakeholders ample time—over seven months—to process the news before the deal officially closed in February 2026. By the time the closure was announced, the market had already factored in the transaction, which was evident from the stock's subdued movement following the finalization.

The real shakeup occurred when the CEO stepped down, causing shares to drop by 5%. This decline followed a previous 5.2% decrease over the preceding week, indicating that the leadership change introduced new uncertainty that investors had not fully anticipated. While the Linx sale was a known event, the CEO's resignation brought an unexpected element into play.

From a valuation perspective, StoneCo is now focused on disciplined capital management rather than sudden gains. The company's enterprise value to EBITDA ratio of 5.5x shows that the proceeds from the sale have already been incorporated into the stock price. Attention now turns to how StoneCo will utilize these funds and whether the new leadership can successfully integrate changes while sustaining growth in its core payments segment. The excitement surrounding the Linx transaction has faded, leaving the company to navigate capital returns and a leadership transition.

The Deal's Financial Structure: What Investors Already Knew

The Linx sale was a calculated move, not a forced exit. With a total value of R$3.41 billion, the deal represented a significant return of capital for StoneCo. However, skepticism about the sale price was justified, as several preliminary offers were below the amount StoneCo originally paid in 2020. This indicates that the final price was the result of negotiation, balancing StoneCo's valuation with buyer caution.

Linx was a major contributor to StoneCo's software division, accounting for 79% of its 2024 revenue and 71% of its profits. Despite its importance, Linx was seen as diverting focus from StoneCo's main payments business. Selling Linx allows StoneCo to concentrate resources and leadership on its primary operations, which may prove more beneficial than the sale price itself.

Gap Reversion Long-Only Strategy: Backtest Overview

• Entry Rule: Buy STNE when the opening price drops by more than 4% compared to the previous day's close.
• Exit Rule: Sell when the closing price exceeds the 20-day simple moving average, after five trading days, or if a take-profit (+6%) or stop-loss (−3%) is reached.
• Risk Controls: Take-profit set at 6%, stop-loss at 3%, and a maximum holding period of five days.

Backtest Results

• Total Return: -6.21%
• Annualized Return: -2.98%
• Maximum Drawdown: 10.86%
• Profit-Loss Ratio: 0.96

Trade Metrics

• Total Trades: 10
• Winning Trades: 2
• Losing Trades: 4
• Win Rate: 20%
• Average Holding Period: 1.7 days
• Max Consecutive Losses: 2
• Profit-Loss Ratio: 0.96
• Average Win Return: 3.23%
• Average Loss Return: 3.13%
• Largest Single Gain: 5.21%
• Largest Single Loss: 4.02%

Regulatory Approval and Market Implications

A major hurdle was removed when Brazil's antitrust authority, CADE, approved the deal without conditions. This paved the way for a smooth transaction and eliminated regulatory uncertainty, which often impacts company valuations. Since the market had already accounted for the sale's proceeds, this regulatory clearance was positive but expected.

Overall, the market's lackluster response to the deal's closure is understandable. The negotiated price for a substantial, non-core asset and the straightforward regulatory process were already reflected in the stock price. Recent declines seem more related to leadership changes and broader market sentiment than to the economics of the Linx sale itself.

Financial Impact: Cash Proceeds Versus Goodwill

The financial effects of the sale are more complex than simply receiving cash. StoneCo gained R$3.41 billion from selling Linx, but it still carries a significant goodwill expense—about R$3.8 billion from the original purchase—which will be amortized over the next eight years. This means the company will continue to face a recurring charge on its earnings, even though it no longer owns the asset. The market views the proceeds as a capital return, but StoneCo's financial statements will reflect ongoing costs.

To offset the loss in revenue, StoneCo plans to support clients' software needs through partnerships and integrated business management solutions. This marks a shift from direct ownership to a platform approach, aiming to retain some software revenue and customer relationships. Given Linx's substantial contribution—79% of software revenue and 71% of profitability in 2024—the effectiveness of this transition is crucial. The partnership model's success will determine whether goodwill amortization impacts earnings more than the loss of Linx's profits.

The upcoming 4Q25 earnings call on March 2, 2026 will be pivotal, as management will outline how the sale proceeds will be allocated. Investors will learn whether the capital will be used for debt repayment, share repurchases, or reinvestment in the payments business. Until then, the financial implications remain somewhat unclear. The goodwill charge will affect earnings for years, and the partnership model's revenue potential is still uncertain. While the cash has been priced in, the real story lies in future earnings after amortization.

Looking Ahead: Key Drivers and Risks

With the Linx sale completed, StoneCo's ability to create value now depends on how it manages its capital allocation. The immediate focus is on leadership changes. The departure of CEO Pedro Zinner and the appointment of CFO Mateus Scherer as the new CEO introduces a significant risk. Scherer has played a major role in shaping the company's capital strategy, but transitioning to the CEO role is a substantial shift. The market's subdued reaction to the sale closure suggests that financial details were already anticipated, but the new leadership's effectiveness in maintaining growth and integrating changes will be crucial for the stock's performance.

Investors should pay close attention to updates on growth forecasts and capital return strategies during the upcoming 4Q25 earnings call. Management will clarify how the R$3.41 billion in proceeds will be used, whether for debt reduction, share buybacks, or reinvestment. Any changes in capital allocation or growth targets will be important signals. The success of the new partnership model for software services must also be monitored, as it needs to compensate for the revenue and profit lost from the Linx sale.

StoneCo's current valuation, with an enterprise value to EBITDA multiple of 5.53x, reflects high expectations for flawless execution. The stock has experienced volatility—down 5.2% over the past five days and showing daily swings of 2.7%—highlighting ongoing uncertainty. If growth in the payments business slows or goodwill amortization impacts earnings more than anticipated, these lofty expectations may be challenged. The sale removed a distraction but also a major profit source. The new leadership must demonstrate they can accelerate growth in the remaining business to justify the valuation, all while managing the transition. The catalysts are clear, but the risks of execution and sustained growth are now at the forefront.