stock is tumbling Thursday as analysts weighed in on the possible outcome of a potential exchange offer for shares held by banks.
(ticker: V) announced after the market close Wednesday that the card company is in discussions with stockholders to possibly allow big banks to exchange up to half their shares of Visa’s class B stock, which don’t trade publicly, into class B-2 shares and C shares. The class C shares could then convert in class A shares and be sold, with certain restrictions. If the plan moves forward, holders of all class A, B, and C shares will have an opportunity to vote on the required amendments, Visa said. Class B shares are owned by domestic banks, while class C shares, which also don’t trade publicly, are owned by non-U.S. banks.
Visa created a three-class common stock structure composed of Class A, B, and C shares with its 2008 initial public offering. The Class B stock was created to protect class A and class C holders from certain pre-IPO litigation.
Morgan Stanley analyst James Faucette wrote in a research note Thursday that he believes the potential exchange offer would be “advantageous” for all of Visa’s stockholders.
“For class A and C shareholders, the exchange would reduce the overhang related to the uncertainty of when and how class B shares eventually become converted and publicly tradeable float,” Faucette said.
Faucette rates Visa stock at Overweight with a $292 price target.
Not everyone on Wall Street agrees. Jefferies analyst Trevor Williams rates Visa stock at Buy with a $280 price target, but wrote in a research note Thursday that he believes the exchange would create an overhang for the stock.
Visa stock is falling 2.7% Thursday to $241.49. The stock was the worst performer in the
Dow Jones Industrial Average,
and the second-worst performer in the
Corrections & Amplifications:
In Visa’s Potential Exchange Offer program, participating Class B holders would exchange their stock for a combination of newly created Class B-2 shares and Class C shares. A previous version of the article incorrectly said that the offer would allow half of Visa’s class B shares to be exchanged for class A shares.
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