Is Banco Inter the next big buy on Brazil’s stock market?

Ever since shares of Magazine Luiza, a fairly unknown retailer from São Paulo’s countryside, rose 10,000 percent in just a handful of years, Brazilian traders have been on the look out for their new cash cow. Lately, Banco Inter, the only fintech listed on the São Paulo stock exchange, seemed to be a strong candidate for the role, but as the company begins making some corporate changes, investors are changing their stance toward it.

This week, Banco Inter has announced it will list its common shares on a follow-on offering, promoting a stock split—dividing all shares into six—and offering units. It will also move to Level 2 of the stock market, which comes with stricter governance rules. The company said it aims to provide more liquidity to its shares, improve its governance and sustain its accelerated growth. Banco Inter is also considering whether it will welcome a new “strategic investor” or offer new shares on the market.

The fintech’s preferential shares (BIDI4) slid after the news, in a sign that investors may not be welcoming the plan. Since its IPO in May 2018, Banco Inter shares climbed an astonishing 250 percent. Now investors are wondering whether it would be wise to indulge in some profit-taking, or if the growth is just an appetizer of what’s...