Learning From 2021Thin moat

No honest account of StoneCo can skip 2021, and this facet exists to face it directly. Flush with ambition after a successful IPO, Stone pushed aggressively into credit — and walked straight into disaster. A new receivables-registry system in Brazil, meant to let lenders register and enforce their claims on merchants' future card sales, rolled out messily; Stone could not properly secure or collect a chunk of the loans it had rushed to make; and the result was heavy provisions and losses severe enough that the company halted its credit operations altogether. It was a self-inflicted wound, and a big one.

What matters for judging Stone today is the response. Rather than abandon credit — which would have surrendered its most promising advantage — the company stopped, absorbed the loss, overhauled its underwriting and collection systems, and rebuilt the book slowly and deliberately: lending mostly to merchants it knew well, securing against receivables it could actually claim, and growing only as the machinery and the results earned the right. By the end of 2025 the book was back to roughly R$2.8 billion and performing¹, grown at a pace meant to avoid repeating the mistake.

The episode cuts both ways for an investor. It is a genuine black mark — evidence that Stone's management could be careless with the very risk that most demands care, and a reason to trust its credit ambitions only as far as the results keep justifying. But a painful, well-learned lesson can also be an asset: a company that has already blown up its credit business once, and rebuilt it chastened, may handle the next expansion with a discipline that an untested rival lacks. Which reading is right will be settled only by how the book performs through the next hard cycle.