Why DLocal Stock Is Sinking This Week

Key Points

• DLocal announced that one of its largest shareholders is trimming its stake in the company.

• The company doesn't receive funds from the secondary offering, so nothing technically changes with its operations.

• Ultimately, DLocal is firing on all cylinders operationally, so investors shouldn't worry over this drop.

• 10 stocks we like better than DLocal ›

Shares of up-and-coming payment platform DLocal (NASDAQ: DLO) were down 11% this week at 11 a.m. ET, according to data provided by S&P Global Market Intelligence.

On Thursday, the Uruguay-based company announced that a secondary share offering would take place, the sale of 15 million shares at $12.75 per share.

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With DLocal's stock price around $14 prior to this news, it was somewhat inevitable that the company's shares would slide closer to the secondary offering price, causing this week's drop.

What does this mean for DLocal?

While this short-term drop temporarily harms all DLocal investors, nothing has fundamentally changed in the company's actual operations.

Instead, its largest shareholder, an affiliate of private equity firm General Atlantic, is simply selling a portion of its shares. Since General Atlantic made its initial minority investment in the company in 2019 -- and will still hold roughly 49 million shares -- I don't believe the offering is an indictment of DLocal.

Investing groups like General Atlantic have a multitude of reasons for selling a given stock, and after a 50% pop over the last year is as good a time as any.

Image source: Getty Images.

If anything, this week's drop makes me interested in adding to my DLocal position. DLocal connects some of the largest merchants in the world to over 2 billion people in emerging economies from more than 40 countries across Latin America, Africa, and Asia, with its suite of 900-plus payment options.

Growing total payment volume (TPV) by 53% in its latest quarter -- and guiding for 40% to 50% TPV growth in 2025 -- DLocal could prove to be a great long-term buy at just 21 times free cash flow.

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Josh Kohn-Lindquist has positions in DLocal. The Motley Fool recommends DLocal and recommends the following options: long January 2027 $7 calls on DLocal and short January 2027 $10 calls on DLocal. The Motley Fool has a disclosure policy.