Visa Considers Amending Share-Class Structure
Visa Inc., the payment-technology company, is contemplating a revision to its unconventional share-class structure. The company, which went public in 2008, currently has three classes of stock: A shares owned by the public, B shares owned by U.S. banks, and C shares held by foreign banks.
When Visa initially went public, it faced litigation from merchants, prompting the company to protect future shareholders from potential loss claims arising from these lawsuits. By introducing Class B shares, Visa ensured that the responsibility for litigation claims would fall on its former bank owners.
Although some claims related to the 2005 merchant suit are still pending, Visa has settled approximately 90% of the associated payment volume at the time. Originally, Visa allowed U.S. banks to sell their Class B shares once all litigation was resolved. However, the company is now considering an amendment to its certificate of incorporation and plans to engage with shareholders on this matter.
Under the proposed plan, all shareholders would have the opportunity to vote on granting banks permission to sell a portion of their Class B shares before finalizing all litigation. This would involve an exchange offer, allowing banks to swap half of their current Class B shares for Class C shares. The sale of Class C shares would then proceed according to a staggered lock-up window. Banks would retain ownership of Class B stock, which would be renamed as Class B-2 stock for participants in the offer. The existing Class B stock would henceforth be known as B-1 shares.
Visa's decision to address its share-class structure reflects its commitment to transparency and responsiveness to its shareholders' interests. By considering this amendment, Visa aims to resolve any potential overhang on its stock and create a balanced environment for all stakeholders involved.
Visa proposes amendment to enhance certainty for stockholders
Visa has announced plans to introduce an amendment that aims to enhance certainty for all stockholders. In a recent blog post, the company highlighted the potential overhang risk associated with Class B shares becoming freely sellable in the public market after the resolution of ongoing litigation. The proposed amendment seeks to mitigate this risk by spacing out the release of Class B shares for the benefit of all common stockholders.
Under the proposed amendment, banks would have the option to exchange some of their Class B stock for Class C stock. This exchange would allow them to gradually sell up to a third of the shares within the first 45 days, up to two-thirds within the first 90 days, and the full amount thereafter.
To ensure additional protection for stockholders, Visa would require participating banks to sign an agreement covering any potential loss litigation if the remaining Class B shares prove insufficient to satisfy future claims.
Since its initial public offering in 2008, Visa's shares have witnessed significant growth. The Class B shares alone are currently valued at approximately $96 billion, a substantial increase from the initial $8 billion value.
Considering this stock appreciation and progress with resolving merchant suits, Visa believes that now is an opportune time for shareholders to consider allowing the exchange offer.
If the amendment is approved, it would allow for future exchange offers, with a minimum of 12 months between each offer. Additionally, each new exchange offer would require a further 50% reduction of the interchange related to longstanding merchant claims.
It remains uncertain when all pending merchant litigation will be resolved. Although a recent damages-class settlement from a 2005 suit reached its conclusion last month, some merchants chose not to participate in the class-action agreement. While Visa has settled with many of these merchants, some claims still remain unresolved.
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