In a move that has sparked mixed reactions from Wall Street analysts, Visa Inc (NYSE:V). is currently in talks with its shareholders regarding a potential exchange offer. This proposition, announced after market hours on Wednesday, would allow major banks to convert up to 50% of their non-publicly traded class B shares into publicly traded class A shares listed on the New York Stock Exchange (NYSE).
The three-tier common stock structure of Visa, which includes Class A, B, and C shares, was established during its initial public offering in 2008. Class B shares are held by domestic banks and Class C shares by non-U.S. banks, with neither being publicly traded. The creation of class B stock served to shield class A and C shareholders from certain pre-IPO litigation.
Analysts have differing views on the proposed exchange. James Faucette of Morgan Stanley believes that the potential exchange would be beneficial to all of Visa’s shareholders. He maintains that for class A and C shareholders, such an exchange would alleviate uncertainty regarding the conversion and eventual public trading of class B shares. Faucette maintains an Overweight rating for Visa stock with a price target of $292.
On the other hand, Trevor Williams from Jefferies suggests that the proposed exchange could create an overhang for the stock. Despite this concern, Williams rates Visa stock as Buy with a price target of $280.
The news appears to have had an immediate impact on Visa’s stock performance. On Thursday, Visa’s stock plunged by 2.7% to $241.49, marking it as the worst performer in the Dow Jones Industrial Average and the second-worst performer in the S&P 500.
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