Have you ever stopped to think about what truly protects investors in stocks in Brazil? There is a concept that many people overlook, but it makes a real difference when things get serious — during a control sale, merger, or acquisition. It’s the famous Tag Along.

Tag Along is basically the right to go along. It sounds simple, but the idea is powerful: when someone sells the control of a publicly listed company, minority shareholders can also sell their shares, at a minimum price proportional to what was paid to the controlling shareholder. It’s a mechanism created to prevent only the controlling party from benefiting from a significant corporate change.

Brazilian law (Article 254-A of the Corporation Law) makes this very clear. If the control is sold for R$ 100 per share, those holding common shares (ON) are entitled to receive at least R$ 80 per share. It is mandatory for the buyer of the control to make this public acquisition offer, but participation is optional — you decide whether to sell or not.

Now, here’s the point that many people don’t fully understand: preferred shares (PN) do not have this right guaranteed by law. This means that in a control sale, the new owner is not obliged to make an offer for the preferred shares. This has made headlines more than once in the market — preferred shares plummet while common shares benefit from the Tag Along.

The listing segments on B3 also make a difference. In the Novo Mercado and Level II, protection is 100% for common shares. In the traditional segment, it’s 80%. But it’s not just about the segment — some companies offer more protection than the law requires. Gerdau, for example, offers 100% Tag Along for both common and preferred shares, even though not required. Itaú did the same. This shows that corporate governance also depends on the company’s strategic decisions, not just the rules.

When you invest in Units (a combination of common and preferred shares), the Tag Along applies only to the common share part. If a Unit has 1 common share and 4 preferred shares, only 20% is protected.

Many people think that Tag Along is everything when choosing a stock. That’s not quite true. Liquidity also matters — there are common shares that hardly trade, while preferred shares have volume every day. And relative price: shares without Tag Along sometimes trade at a discount, which can be an opportunity for those seeking dividends and with a clear margin of safety.

The Brazilian market has interesting examples. Petrobras (PETR3 vs PETR4), Itaú (ITUB3 vs ITUB4) — in all these cases, Tag Along and voting rights explain much of the price difference and investor profile. But there are also banks outside the Novo Mercado that have historically delivered better returns than top governance companies that destroyed value.

Tag Along is an important right, no doubt. But it’s not the only criterion. Those who want to protect themselves in significant corporate events must consider everything together: share class, listing segment, liquidity, relative price, company history, and risk profile.

In the end, investors who base their decisions on data and clear strategies tend to be better prepared for different scenarios.