Summary
Visa Inc. has announced a significant release of approximately $7.3 billion from its Series B and Series C Convertible Participating Preferred Stock. This release, triggered by the fourth anniversary of the Visa Europe acquisition and governed by a Litigation Management Deed, reflects a conservative assessment of ongoing litigation risk related to multilateral interchange fee rates in the Visa Europe territory. The reduction will lead to a partial conversion of the Preferred Stock into Series A Convertible Participating Preferred Stock, with the adjustments calculated based on the volume-weighted average price of Visa's Class A Common Stock over a specific trading period. Investors should note the impact on the Class A Common Equivalent Number for both Series B and Series C Preferred Stock, with specific reductions outlined for each. This event is scheduled to be effective on September 24, 2020. The primary implication for investors is the mechanism by which this liability reduction is being handled. The conversion of Preferred Stock into Series A Preferred Stock, and subsequently into Class A Common Stock upon sale, suggests a potential increase in the outstanding common stock in the future, contingent on these sales. The shares issued are being done so under an exemption from registration requirements, which is a standard procedure in such transactions. While this event relates to historical litigation, it signifies a de-risking of the balance sheet and a resolution of a contingent liability associated with the Visa Europe acquisition.
Key Highlights
- 1Visa is releasing approximately $7.3 billion from its Series B and Series C Convertible Participating Preferred Stock.
- 2This release is related to the fourth anniversary of the Visa Europe acquisition and a Litigation Management Deed.
- 3The release is based on a conservative assessment of litigation risk concerning multilateral interchange fee rates in the Visa Europe territory.
- 4The Series B Preferred Stock liability coverage will be reduced by ~$3.1 billion, and Series C by ~$4.2 billion.
- 5This will result in a partial conversion of the Preferred Stock into Series A Convertible Participating Preferred Stock.
- 6Approximately 375,042 shares of Series A Preferred Stock will be issued on September 24, 2020.
- 7The Series A Preferred Stock will automatically convert into Class A Common Stock upon sale to eligible holders.