StoneCo's Divestiture to Focus on MSMB Growth: A Closer Look

StoneCo Ltd. is divesting 79% of its software segment to focus on core financial services and micro, small and medium business (MSMB) growth. The company's MSMB total payment volume rose 17% YoY in Q1 2025, with a 17% increase in active MSMB clients to 4.3 million. StoneCo's bundling strategy, banking arm growth, and PIX instant payment system have contributed to its momentum. The company projects MSMB TPV to exceed R$670 billion by 2027, with competitors PagSeguro and MercadoLibre also seeing growth in their MSMB segments.

StoneCo Ltd. (NASDAQ: STNE) has announced a significant divestment within its software segment, representing 79% of its software segment revenues in 2024. This strategic move aims to enhance operating efficiency, improve profit margins, and focus on its core financial services and micro, small and medium business (MSMB) growth [1].

The company has entered into an agreement to sell Linx and related software assets to TOTVS for an enterprise value of R$3.05 billion, plus the net cash position of these assets currently estimated at R$360 million, resulting in a total amount of R$3.41 billion [1]. Additionally, SimplesVet, a veterinary-focused software solution, has been sold to PetLove for R$140 million [1]. These transactions are subject to customary closing conditions and regulatory approvals, including clearance by CADE, the Brazilian antitrust authority [1].

StoneCo's decision to divest these assets is expected to unlock shareholder value and allow management to concentrate on its core growth strategy. The software businesses not included in these transactions represent R$ 326 million in revenues and R$32 million in Adjusted EBITDA in 2024 [1]. These businesses will either be integrated into StoneCo's core offerings or operated independently while StoneCo evaluates their strategic fit and long-term value creation potential [1].

The divestment comes as StoneCo's MSMB total payment volume (TPV) rose 17% year over year in the first quarter of 2025 to R$119.5 billion, with a 17% increase in active MSMB clients to 4.3 million [2]. The company's bundling strategy, where clients using three or more products increased to 38%, up from 26% a year ago, has contributed to this momentum [2]. StoneCo's banking arm has also grown rapidly, with total retail deposits surging 38% to R$8.3 billion and its credit portfolio hitting R$1.4 billion [2]. The PIX instant payment system has emerged as a major monetization lever, with transaction volumes up 95% year over year [2]. StoneCo projects MSMB TPV to exceed R$670 billion by 2027, with a 14% compound annual growth rate (CAGR) from the 2024 levels [2].

Among competitors, PagSeguro Digital Ltd. (PAGS) and MercadoLibre, Inc. (MELI) are also seeing growth in their MSMB segments. PagSeguro's MSMB TPV grew 11.2% year over year to R$95.2 billion, while MercadoLibre's TPV rose 43% year over year to $58.3 billion in the first quarter of 2025 [2]. StoneCo's shares have surged 76.5% year to date, outperforming both the broader industry and the S&P 500 Index [2]. The company's forward-looking statements and estimate revisions reflect a positive trend, with the Zacks Consensus Estimate for 2025 and 2026 EPS suggesting 10.4% and 16.1% growth year over year, respectively [2].

References:
[1] https://finance.yahoo.com/news/stoneco-announces-divestment-software-assets-110000754.html
[2] https://www.nasdaq.com/articles/can-stonecos-software-divestment-unlock-msmb-focused-growth