22 April 2019
Ant Financial, Alibaba's fintech arm controlled by Jack Ma (left), joins Warren Buffett's Berkshire Hathaway in StoneCo's IPO. Photo: Reuters
Ant Financial, Alibaba's fintech arm controlled by Jack Ma (left), joins Warren Buffett's Berkshire Hathaway in StoneCo's IPO. Photo: Reuters

Brazil’s fintech startup StoneCo attracts Buffett and Jack Ma

Brazil’s financial technology landscape is becoming increasingly appealing to big-name investors despite the country’s economic woes.

Chinese fintech giant Ant Financial, an affiliate of Alibaba Group controlled by billionaire Jack Ma, has agreed to invest in Brazilian payments firm StoneCo’s initial public offering (IPO), shortly after rival Tencent announced its investment in Brazilian fintech startup Nubank.

According to a securities filing from Stone Co, Ant Financial has committed to invest US$100 million in the company’s share offering on the Nasdaq. Reuters reported that StoneCo’s IPO has also drawn interest from Warren Buffett’s Berkshire Hathaway Inc., which is seeking a stake in the firm.

Madrone Capital Partners, which held a 9.3 percent stake in the firm prior to the IPO, also wants to buy more shares in the offering, Bloomberg reported. Madrone is a US-based investment firm backed by heirs to the Walmart Inc. fortune.

According to its IPO filing last week, StoneCo is offering up to 54.9 million shares at a price range of US$21 to US$23 per share. It could raise as much as US$1.26 billion if it prices the shares at the top of the range.

With the involvement of international big-name backers such as Goldman Sachs, JPMorgan Chase & Co., and Citigroup, the global coordinators of the IPO may discuss raising the share price above the current range, Reuters reported.

Other StoneCo shareholders include Brazilian investment firm 3G Capital Inc.’s founders Jorge Paulo Lemann, Marcel Telles, and Carlos Alberto Sicupira, Reuters said. 3G Capital and Berkshire Hathaway already share control of Kraft Heinz Co.

Founded in 2012, São Paulo-based StoneCo mainly provides financial technology payment processing services to merchants across in-store, online, and mobile channels in Brazil. It generates revenue from the fees it charges for such services as transaction payment processing, prepayment financing, subscription, and equipment rentals.

“Our focus is primarily on targeting the approximately 8.8 million small- and medium-sized businesses,” StoneCo said in its filing. “We believe these merchants have been historically under-served and over-charged by traditional banks and legacy providers that use older technology, less effective distribution networks.”

With 200,600 active clients, the company posted a net income of 87.7 million reais (US$23.6 million) and revenue of 636 million reais (US$171.7 million) in the first half of 2018.

Brazil’s local financial services sector is heating up as startups target the country’s 60 million unbanked consumers. PwC data suggests there about 400 startups in Brazil, with many focusing on digital banking.

Earlier this month, Tencent acquired a minority stake in São Paulo-based virtual credit card startup Nubank, in a deal worth US$180 million, marking Tencent’s first-ever investment in Brazil.

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