Investors operating in the Brazilian stock market often come across a term that seems technical at first glance but makes a real difference: the Tag Along. Basically, it is the right that minority shareholders have to follow the controlling shareholder when there is a sale of control of the company. Simply put, but with implications that few take seriously.

The law has guaranteed this since 1976, in Article 254-A of the Corporation Law. When someone sells control of a listed company, the new controller is required to make a public offer to buy the minority shareholders’ shares — and must pay at least 80% of what was paid to the controlling block. It’s like a safety floor: if the person in charge of the company managed to sell for 100 reais, you holding common shares have the right to sell for at least 80.

Now, here’s the detail that changes everything: preferred shares are not legally guaranteed this right. That’s right. If you have PN and control changes hands, the company is not obliged to make any offer. This has happened in practice — Ambev is a classic example where preferred shares depreciated while common shares benefited from the Tag Along.

In Units, it’s even more complicated. Since they are composed of both common and preferred shares, the protection only applies to the common share portion. A Unit with 1 common and 4 preferred shares? You only have 20% protection.

But then B3’s segment rules come into play. In the Novo Mercado, for example, the Tag Along is 100% for both common and preferred shares. It’s also 100% in Level II. In traditional Level I, it’s 80% for common shares. That’s why many people associate Novo Mercado with greater protection — and it makes sense.

Petrobras is the most obvious example. PETR3 (common) has a guaranteed Tag Along of 80%. PETR4 (preferred) has no legal obligation. As a result: investors seeking governance go for PETR3, those looking for income and liquidity stick with PETR4 and hope there’s no change of control.

But not everything is black and white. For example, Itaú offers 100% Tag Along for both classes of shares — even though preferred shares are not legally required to do so. Gerdau does the same. This shows that governance is more than just what the law demands.

The point is that Tag Along does matter. But it shouldn’t be the only criterion. Companies in the Novo Mercado have already lost value while traditional companies delivered solid returns. Brazilian banks, most outside the Novo Mercado, have historically performed well. Liquidity and price also matter — a preferred share can be much more traded than the corresponding common share, making entry and exit easier.

The conclusion is obvious: compare companies, understand the real risks of each, and choose based on data, not labels. Tag Along is an important protection in corporate events, but those who invest only by looking at it are missing the bigger picture.