What happened
Shares of Brazilian fintech StoneCo (STNE 3.34%) were down big in Friday trading, with shares off by 12.8% as of 1:46 p.m. ET.
While many other growth stocks were hurting today as investors took near-term profits and long-term interest rates rose, StoneCo announced a fairly large shake-up of its board of directors that will see one of the company's co-founders leave. That seems to have thrown investors for a loop.
So what
On Thursday evening, StoneCo announced the retirement of three longtime board members and the appointment of two new members.
On their way out are Eduardo Cunha Monnerat Solon de Pontes, Ali Mazanderani, and Thomas A. Patterson. This is especially notable as Eduardo Pontes was a co-founder of StoneCo, along with remaining chairman Andre Street, back in 2012. Investors don't like to see founders leave companies as they are usually the visionaries and beating hearts of the enterprise. However, Street will remain as chairman. The current CEO is Thiago Dos Santos Piau, who has had this position since 2017.
StoneCo is replacing the departing board members with two top executives: Conrado Engel is a former senior executive at several large Latin American banks, including Banco Santander S.A. (SAN 2.67%) and HSBC Holdings' (HSBC 0.65%) Brazil division; Pedro Zinner is CEO of Eneva S.A. (ENEV3.SA) and a former investment banker.
The departure of a founding board member may not be a bad thing; on the recent fourth-quarter conference call, management admitted it had made some mistakes over the past year:
This past year was unsatisfying for Stone. We executed well in some areas, but we certainly made some mistakes. We took an aggressive approach. This is how we built the company and how we help lead the fintech revolution in Brazil. But I think at the end of the day, we tried to do a lot last year, and we simply did not execute it, as well as we would have liked. We ramped our credit offering quickly, but we did not manage this expansion well.
Perhaps the board shake-up is geared toward instilling more discipline and less of the "move fast and break things" mentality seen in many founders and entrepreneurs.
Image source: Getty Images.
Now what
The board shake-up may not have been the only reason for the stock drop today. StoneCo, which had been beaten down severely over the past year, saw its stock rocket higher after its recent earnings report was better-than-expected. So, there may be some profit-taking to end the week.
Also, the 10 year Treasury bond yield was up strongly on Friday, hitting 2.49% as of this writing. Rising long-term yields tend to depress the valuations for high-growth stocks like StoneCo, and many of its high-multiple peers in the fintech space were down Friday as well.
StoneCo is entering a new chapter amid much uncertainty and a difficult Brazilian economy. Aggressive investors may wish to take a look at the stock during this fresh start, however, as shares are down 77% over the past year.
