Visa (NYSE:V), the highly-regarded payment card company, encountered a significant fall in its stock value on Thursday. The company, a usually robust performer on the S&P 500 index, watched its shares tumble by roughly 2.6% following an announcement regarding the potential alteration of a substantial number of non-publicly traded shares.
The focus of this development is the company's Class B shares. Visa has launched a process that would allow these shareholders to sell part of their stock. The Class A shares are publicly traded, whereas Classes B and C are not. The latter two classes are primarily owned by financial institutions that work closely with Visa.
The creation of B class shares was originally intended to protect the Class A and Class C shareholders from specific pre-IPO litigation known as U.S. Covered Litigation. This litigation relates to potential loss claims from merchants tracing back to Visa's pre-IPO history when it was jointly owned by banks. These banks were made accountable for any payouts resulting from such lawsuits. Initially, these stocks were not intended to be sold until all litigation had been resolved.
According to Visa, nearly 90% of the disputed payments volume and interchange fees from that period have now been settled. The tri-class structure was devised before Visa's initial public offering (IPO) in 2008.
In terms of market value, the collective worth of the Class B shares stands at approximately $96 billion, while the market cap of the Class A shares traded on the New York Stock Exchange surpasses $502 billion.
Over the next few weeks or months, Visa intends to engage its stockholders in discussions about this potential conversion. If the feedback is positive, the company plans to proceed with a shareholder vote on the matter.
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