dLocal Appoints Independent Directors to Bolster Board, Yet Governance Risks Linger

What happened

dLocal has completed its transition to a majority independent Board of Directors with the appointments of Paco Ybarra and Nelson Mattos, bringing the board to nine members with five independents. This move directly addresses governance concerns raised in the DeepValue report, which highlighted elevated risks from past short-seller allegations and regulatory scrutiny in emerging markets. While the increased independence could enhance oversight and transparency, it does not resolve the dual-class share structure that concentrates voting power among controlling shareholders. Investors should note that board changes alone are insufficient to mitigate broader risks like volatile free cash flow and ongoing regulatory inquiries in key markets such as Brazil and Nigeria. Therefore, this development is a positive but incremental step that requires continued scrutiny beyond corporate propaganda.

Implication

In the near term, improved board independence could boost investor confidence and potentially support the stock price by addressing a key watch item from the DeepValue report. However, the dual-class share structure remains unchanged, meaning controlling shareholders retain significant influence, which limits the impact on true governance reform. Regulatory outcomes in Brazil and Nigeria are critical unresolved risks that could materially affect operations, and this news does not alter their trajectory or potential negative consequences. Free cash flow volatility, evidenced by swings from positive to negative in recent years, must stabilize to validate earnings quality and reduce skepticism around the business model. Overall, while governance is taking a step forward, investors should maintain a cautious stance, focusing on regulatory developments and cash-conversion metrics before considering a more bullish position.

Thesis delta

This news slightly reduces the governance risk component of the investment thesis, as board independence is a monitored improvement. However, core risks such as regulatory scrutiny, FCF volatility, and client concentration remain unchanged, so the overall 'POSSIBLE BUY' stance is unchanged pending further evidence from watch items.