01—Abstract
Summary
Summary of the 8-K filed September 1, 2020. Cited figures are marked; the original filing is the authoritative source.
Visa Inc. has announced a significant release of approximately $7.3 billiona 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.
02—Key points
Key Highlights
- Visa is releasing approximately $7.3 billion from its Series B and Series C Convertible Participating Preferred Stock.
- This release is related to the fourth anniversary of the Visa Europe acquisition and a Litigation Management Deed.
- The release is based on a conservative assessment of litigation risk concerning multilateral interchange fee rates in the Visa Europe territory.
- The Series B Preferred Stock liability coverage will be reduced by ~$3.1 billion, and Series C by ~$4.2 billion.
- This will result in a partial conversion of the Preferred Stock into Series A Convertible Participating Preferred Stock.
- Approximately 375,042 shares of Series A Preferred Stock will be issued on September 24, 2020.
- The Series A Preferred Stock will automatically convert into Class A Common Stock upon sale to eligible holders.
03—Questions
Frequently Asked Questions
What is the primary reason for this $7.3 billion release from Visa's preferred stock?
The release is a mandatory event triggered by the fourth anniversary of the Visa Europe acquisition. It's based on a reassessment of the ongoing litigation risk related to multilateral interchange fee rates in the Visa Europe territory, as outlined in the Litigation Management Deed.
How will this affect Visa's common stock?
The release will result in the issuance of Series A Convertible Participating Preferred Stock, which will then automatically convert into Class A Common Stock upon sale to eligible holders. While this doesn't immediately increase the common stock count, it represents a potential future dilution event depending on when and if these Series A shares are sold.
Are the newly issued shares subject to registration?
No, the Series A Preferred Stock issued in connection with this release, and the subsequent Class A Common Stock upon sale, will be issued in reliance on the exemption from registration requirements of the Securities Act of 1933, specifically Section 3(a)(9).
What is the significance of the 'Class A Common Equivalent Number' reduction?
The reduction in the 'Class A Common Equivalent Number' signifies that fewer shares of common stock will be ultimately tied to each share of the outstanding preferred stock. This directly reflects the decreased contingent liability associated with the Visa Europe acquisition.
04—Continue