This week witnessed an 11% decline in the share price of DLocal, a prominent payment platform. The drop was triggered by news of a secondary share offering, where 15 million shares were made available at $12.75 each. This move by General Atlantic, DLocal's largest shareholder, to trim its stake, saw the stock price adjust closer to the offering value. Despite this market reaction, DLocal's core business operations remain unaffected. The company continues to demonstrate robust performance, with significant growth in its total payment volume. For discerning investors, this temporary dip in valuation could signify an attractive entry point into a fundamentally sound and growing enterprise.
On Thursday, the Uruguay-based payment solution provider, DLocal, announced a secondary public offering. This involved the sale of 15 million shares at a price point of $12.75 per share. Given that DLocal's stock was trading at approximately $14 before this announcement, it was almost an assured outcome that the share value would converge with the offering price, leading to the observed weekly downturn.
The current situation, while causing a short-term depreciation in DLocal's stock value for existing investors, does not reflect any deterioration in the company's underlying business. Rather, it stems from the strategic decision of General Atlantic, DLocal's principal shareholder, to reduce its holdings. This private equity firm had initially invested in DLocal in 2019 and will still maintain a substantial stake of roughly 49 million shares even after this offering. Therefore, this action by General Atlantic should not be interpreted as a negative assessment of DLocal's prospects.
Investment entities such as General Atlantic often have various motivations for divesting from a particular stock. A 50% increase in DLocal's stock value over the past year presented an opportune moment for them to realize some gains. From an investor's perspective, this recent price adjustment could actually enhance the appeal of acquiring more DLocal shares. The company plays a crucial role in connecting major global merchants with over 2 billion individuals in developing economies across more than 40 countries in Latin America, Africa, and Asia, offering an extensive range of over 900 payment options.
With a reported 53% surge in total payment volume (TPV) in its most recent quarter, and projections for TPV growth ranging from 40% to 50% in 2025, DLocal appears to be an excellent long-term investment. Its valuation, at just 21 times its free cash flow, further underlines its potential as a compelling acquisition for investors seeking growth opportunities.
Ultimately, the recent downturn in DLocal's stock, driven by a secondary offering rather than operational concerns, offers a compelling chance for investors. The company's consistent growth in payment volumes and its strategic position in emerging markets affirm its robust fundamentals, making it a promising long-term investment despite short-term market fluctuations.