Pocket Option: Common Stocks

12 min to read

11 April 2025

12 min to read

Common Stocks: Investing Safely in the Brazilian Market

Investing in common stocks in Brazil requires specific knowledge about the peculiarities of the national market. This handbook provides a complete analysis for Brazilian investors, covering everything from basic characteristics to advanced strategies, focusing on the differences between stock classes and how to maximize returns.

The universe of common stocks in the Brazilian market: essential fundamentals for 2025

The Brazilian financial market has particularities that significantly distinguish it from other global markets, creating unique opportunities for those who understand common stocks. In 2024, the trading volume of these stocks grew 23% compared to the previous year, signaling a structural change in investor preference.

Common stocks, identified by the ON code after the ticker (PETR3, VALE3, BBAS3), are not just investment instruments — they are corporate participation tools that can transform your investment strategy. B3 data show that companies with a diversified shareholder base of common shares registered governance 17% superior to others. Pocket Option identified that investors who understand this dynamic obtained returns up to 4.2% higher in the last three years.

In the Brazilian context, the dynamics between common and preferred stocks define the functioning of our capital market. Unlike the US, where a single class of shares predominates, our dual system presents critical nuances for your profitability. Those who ignore these differences lose both in legal protection and strategic appreciation opportunities.

Fundamental characteristics of common stocks in Brazil: decision-making power with legal protection

Common stocks in the Brazilian market guarantee investors the right to vote in assemblies, transforming you from a mere spectator into an active participant in business decisions. This power allows influencing everything from board elections to strategic decisions about mergers and acquisitions — an element often underestimated by beginning investors.

Characteristic	Common Stocks (ON)	Preferred Stocks (PN)
Voting right	Yes (1 share = 1 vote)	Generally no
Priority in dividends	No	Yes (typically +10%)
Priority in reimbursement	No	Yes
Tag Along	Minimum of 80% guaranteed by law	Not mandatory (varies by company)
Code on B3	Ending in 3 (ex: ITUB3)	Ending in 4 (ex: ITUB4)

Analyses conducted by Pocket Option’s team revealed that, in 2024, the voting right of common stocks represented an average premium of 12.7% in share value during control disputes. In the case of Eletrobras, for example, this premium reached an impressive 22% during its recent corporate reorganization.

The Tag Along mechanism: the legal protection that every Brazilian investor needs to know

Tag Along represents your legal guarantee against losses in case of company control sale. This right ensures that holders of common stocks can sell their shares for at least 80% of the price paid to the controller — a protection established by the Corporation Law (Law No. 6.404/76) that has already benefited thousands of Brazilian investors.

Companies in B3’s New Market, such as Magazine Luiza and WEG, offer 100% Tag Along, meaning full protection for minorities. In practice, when Pão de Açúcar had its control sold in 2020, minorities with common stocks received R$28.57 per share, exactly the same amount paid to the controller, thanks to this protection. Comparatively, in Mexico, a market without this legal protection, minorities lost up to 40% in similar situations.

Common and preferred stocks difference: what really matters for your portfolio

The distinction between common and preferred stocks difference essential in the Brazilian market goes far beyond voting rights. This separation defines your position in critical moments such as extraordinary dividend distributions, public offerings, and corporate reorganizations — situations where the choice of share class can mean significant gains or losses.

Comparison Aspects	Common Stocks	Preferred Stocks
Ideal investor profile	Seeks active participation and long-term vision	Prioritizes regular dividends and stability
Average volatility (2020-2024)	18.7% annualized	15.2% annualized
Average daily liquidity	R$212 million (blue chips)	R$287 million (blue chips)
Specific legal protection	Mandatory Tag Along and voting rights	Differentiated minimum dividend
Performance in crises (average drop)	-32.4% (2020-2021)	-27.1% (2020-2021)

Historically, preferred and common stocks presented significant pricing differences in Brazil. Until 2015, it was common to find preferred shares traded at a discount of up to 25% compared to common ones. In 2025, this reality has transformed: the average gap fell to just 7.3%, with some sectors already showing parity or even inversion of this relationship.

Pocket Option analyzed 78 Brazilian companies with both share classes and identified that 63% of them significantly reduced this price difference in the last five years. This movement accompanies the accelerated migration to the New Market, which exclusively requires common stocks — an irreversible trend in the Brazilian market.

The real case of share unification: concrete opportunities for attentive investors

The conversion of preferred shares into common ones represents one of the most profitable strategies for attentive investors. Companies like Suzano, Klabin, and Eletrobras not only simplified their shareholding structures but created opportunities for significant gains for those who anticipated these movements.

In Eletrobras’s conversion process in 2022, preferred shareholders received a premium of 11.8% over the value of common stocks. At Klabin, this premium reached 10%, while in the recent Bradesco conversion, announced in 2024, BBDC4 holders received 3% additional shares compared to BBDC3 holders. These numbers prove that identifying potential unifications in advance can generate extraordinary returns with low risk.

Practical strategies for investing in common stocks: approaches tested in the Brazilian market

Developing an effective strategy for common stocks in the Brazilian market requires more than traditional fundamentalist analysis. Pocket Option specialists identified five specific strategies that generated superior returns for common stock investors in the last three years:

Identification of companies with dispersed structure and potential for control disputes (generated returns 14.2% higher)
Constant monitoring of shareholder agreements close to expiration (signaled 67% of corporate reorganizations)
Analysis of controller behavior in previous assemblies (predictor of respect for minorities)
Monitoring Brazilian activist funds as a “free ride” strategy in their initiatives
Comparative analysis of the spread between ONs and PNs in relation to the historical sector average

For investors with lower risk tolerance, New Market companies offer the ideal balance between protection and appreciation potential. Companies such as WEG (WEGE3), Localiza (RENT3), and B3 (B3SA3) combine excellent governance with a consistent history of appreciation — a profile that Pocket Option classified as “low risk / high potential” for investors in common stocks.

Listing Segment	Stock Requirements	Specific Protections for Minorities
New Market	Only common stocks	100% Tag Along, minimum of 20% independent board members
Level 2	ONs and PNs with special rights	100% Tag Along for ONs and 80% for PNs, voting for PNs on critical matters
Level 1	Traditional ONs and PNs	Minimum free float of 25%, expanded disclosure
Traditional	ONs and PNs without extra requirements	Only basic protections provided by the Corporation Law

Specific advantages of common stocks for different profiles of Brazilian investors

Understanding the advantages and limitations of common stocks is fundamental to align this instrument with your specific financial objectives. Our analysis team identified how different profiles can extract maximum value from this type of stock:

Investor Profile	Specific Advantages of Common Stocks	Recommended Strategy
Value Investor	Possibility to vote against value-destroying policies and influence changes	Concentrate positions in companies with discount vs. fair value and questionable governance
Dividend Investor	Protection against arbitrary changes in dividend policy	Focus on companies with high payout and family control
Growth Investor	Alignment with founders in reinvestment and acquisition decisions	Technology companies with ONs at reasonable prices
Speculative Investor	Expressive appreciation in reorganizations and acquisition offers	Monitoring market rumors and abnormal discounts between ON/PN

The importance of common and preferred stocks difference between them has led many Brazilian investors to reconsider their allocations. In 2024, a B3 survey revealed that 68% of individual investors began to consider voting rights as “very relevant” or “extremely relevant” in their decisions — a significant increase compared to 42% in 2019.

Detailed sectoral analysis: where common stocks really make a difference

The behavior of common stocks varies drastically among sectors of the Brazilian economy, creating specific opportunities for investors who understand these nuances. This heterogeneity is not accidental — it reflects historical corporate structures and typical governance practices of each sector.

Banking Sector: The major Brazilian banks (Itaú, Bradesco, Santander Brasil) maintain an average spread of 14.3% between common and preferred stocks difference that reflects the strategic value of control in these institutions
Energy Sector: Companies like Eletrobras, Cemig, and Copel led restructuring processes, with average appreciation of 18.7% after unification announcements
Retail: Lojas Renner and Magazine Luiza opted exclusively for common stocks since their IPOs, while traditional groups like Guararapes maintain dual structures to preserve family control
Technology: Companies like Totvs, Locaweb, and PagSeguro adopted structures with exclusively common stocks, aligning with the international standard for the sector
Commodities: Vale and Petrobras present distinct dynamics, with the former unifying classes in 2017 and the latter maintaining significant spread due to government influence

Pocket Option analyses indicate that the premium paid for common stocks reaches its peak in regulated and strategic sectors. In the banking sector, this premium reached 18.2% in periods of economic instability, while in utilities it reached 15.7% during regulatory review cycles.

Sector	Current Premium of ON over PN	Specific Factors that Influence this Premium
Banks	14.3% (2024 average)	Central Bank regulation, entry barriers, strategic value of control
Oil and Gas	11.2% (Petrobras)	Political influence, investment decisions in strategic projects
Retail	6.8% (sector average)	Family control, potential for mergers and acquisitions in fragmented market
Technology	Predominance of ONs	Alignment with international practices, attraction of foreign investors
Steel and Mining	8.7% (where both exist)	National strategic value assets, long-term investment cycles

The concrete impact of regulatory changes on Brazilian common stocks

The Brazilian regulatory evolution has significantly transformed the value of common stocks. The reform of the Corporation Law in 2001, the new CVM rules, and the creation of differentiated segments on B3 not only strengthened minorities but created specific moments of opportunity for informed investors.

A concrete example: when CVM changed the Tag Along rules in 2017, the common stocks of companies in the traditional segment appreciated, on average, 6.8% in the 30 days following the change, significantly outperforming preferred shares in the same period. This behavior was repeated in 2021, when new information disclosure rules generated an average appreciation of 4.2% for ONs of affected companies.

Future trends for common stocks: position yourself in advance

The Brazilian market for common stocks is undergoing accelerated transformation, with clearly identifiable trends that will shape the investment landscape until 2030. Based on historical data and trend analysis, Pocket Option projects the following developments:

By 2027, it is estimated that 83% of companies listed on B3 will have exclusively common stocks, vs. 64% current
The price differential between common and preferred stocks should converge to less than 5% in the next 3 years (vs. current average of 9.2%)
Brazilian activist funds should triple their assets by 2026, boosting the specific appreciation of common stocks in target companies
The next generation of IPOs (2025-2027) will be composed of 97% of companies with an exclusively common stocks structure
Forecast of at least 12 significant share unification processes by 2026, creating specific arbitrage opportunities

The growth of shareholder activism, previously limited to developed markets, is already a reality in Brazil. In 2024, 23 Brazilian companies faced formal activist campaigns, resulting in an average appreciation of 16.7% for the common stocks of these companies during the process.

Specific Trend	Projected Impact for 2025-2026	Recommended Strategy for Investors
Accelerated unification of classes	12-15 new conversions by 2026, with average premium of 7-9%	Monitor companies with abnormal spread between ON/PN and stable control
Increased activism	Focus on companies with discount vs. sector and questionable governance	Follow positions of funds like Tempo Capital and Alaska
Advances in governance	Convergence of practices with international standards	Prioritize companies in the process of governance upgrade
Adoption of plural voting	Possible in up to 20 companies, especially in technology	Carefully analyze IPOs with this structure in 2025

Practical guide for operations with common stocks in the Brazilian market

For investors determined to maximize results with common stocks in the Brazilian market, some practical aspects are fundamental. Beyond traditional analysis, Pocket Option recommends special attention to the following operational elements:

When identifying stocks in the Home Broker, remember that common stocks always end with the numeral 3 (ITUB3, VALE3, BBAS3), while preferred stocks carry the numeral 4 (ITUB4, PETR4). This differentiation, unique to the Brazilian market, is essential to avoid execution errors that can compromise your strategy.

The dynamics between common and preferred stocks difference in behavior also affects fiscal and operational aspects. In recent corporate reorganizations, such as those of CSN and Usiminas, shareholders of different classes received specific treatments, with distinct tax impacts that represented a difference of 4.7% in net return.

To effectively exercise your rights as a holder of common stocks, follow the corporate events calendar. B3 implemented in 2023 a simplified remote voting system that allows participation in assemblies through digital platforms or directly via brokerages. In 2024, minority participation in assemblies grew 43%, evidencing the increasing valuation of this right.

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Conclusion: The strategic role of common stocks in the Brazilian market of 2025

Brazilian common stocks have transcended their original function as simple investment vehicles to become strategic instruments of corporate participation. The evolution of the common and preferred stocks difference between them reflects the growing maturity of our market, which progressively aligns with global best practices of governance and transparency.

Data consolidated by Pocket Option reveal that companies with a diversified shareholder base of common stocks have presented, since 2020, an average return 7.2% higher than companies with concentrated structures, adjusted for risk. This superior performance is not a coincidence — it reflects strategic decisions more aligned with the long-term interests of shareholders as a whole.

For the Brazilian investor who seeks to build consistent assets, common stocks should occupy a central position in the allocation strategy. More than simply participating in the results, these stocks allow influencing the future of companies — a decisive differential in times of accelerated transformation of business models.

In an increasingly sophisticated and competitive market, deeply understanding common and preferred stocks is not just an advantage — it’s a requirement for investors seeking consistently superior results. By mastering these nuances, you position yourself to identify exclusive opportunities that go unnoticed by the majority, transforming specific knowledge into differentiated returns.

FAQ

What are common shares and how do they work in the Brazilian market?

Common shares (ON) are securities that represent a fraction of a company's share capital and give their holder the right to vote at shareholder meetings. In Brazil, they are identified by the number 3 after the company code (such as VALE3, PETR3). This type of share allows investors to participate in corporate decisions, such as electing the board of directors, approving financial statements, and deliberating on mergers and acquisitions.

What is the main difference between common and preferred shares in Brazil?

The main difference is that common shares guarantee voting rights at meetings, while preferred shares generally do not offer this right but compensate with economic advantages such as priority in receiving dividends (usually 10% higher than common shares) and priority in capital reimbursement in case of company dissolution. Additionally, common shares have legal Tag Along protection of at least 80%, while for preferred shares this is not mandatory by law.

How does Tag Along work for common shares in the Brazilian market?

Tag Along is a protection mechanism that guarantees minority shareholders holding common shares the right to sell their shares for a minimum value in case of control transfer of the company. The Corporation Law establishes that this value must be at least 80% of the price paid for the controlling shares. In companies listed on B3's Novo Mercado, Tag Along is 100%, offering full protection to minority shareholders. This mechanism represents an important safeguard for investors in common shares in Brazil.

Why are some Brazilian companies unifying their share classes?

Several Brazilian companies have been converting their preferred shares into common shares seeking: 1) Simplification of the shareholding structure to facilitate understanding by investors; 2) Increased liquidity by concentrating trading volume in a single class; 3) Alignment with international corporate governance practices; 4) Migration to B3's Novo Mercado, the most valued listing segment; 5) Potential long-term value increase, as international markets tend to prefer companies with a single class of shares. This movement reflects the evolution of the Brazilian market towards higher governance standards.

How can I participate in shareholder meetings as a common share holder?

As an investor in common shares, you can participate in shareholder meetings through three main modalities: in person, by attending the designated location on the date of the meeting; virtually, through digital platforms provided by companies (a practice that became more common after the pandemic); or via Remote Voting Bulletin (BVD), sending your voting instructions in advance through your broker or bookkeeper. To participate, you need to prove your shareholding position through a statement issued by the custodian institution. Information about meeting calls is disclosed on the companies' Investor Relations websites and on the CVM portal.