Visa Details Square Stake
February 13 2016 - 3:03AM
Dow Jones News
(FROM THE WALL STREET JOURNAL 2/13/16)
By Telis Demos and Chelsey Dulaney
Square Inc. shares rallied Friday after Visa Inc. revealed the
size of its investment in the mobile-payments startup subsequent to
Square's initial public offering.
Square, founded and run by Twitter Inc. Chief Executive Jack
Dorsey, had announced Visa's investment without disclosing its size
in April 2011, when the company was still private.
In a regulatory filing Thursday, Visa said it owns about 4.19
million of Square's Class B shares, which don't trade publicly. But
the credit-card company has the option to convert those shares to
as much as 3.52 million Class A shares, currently equal to a 9.99%
stake in the publicly traded share class.
Visa hasn't bought or sold Square shares since its original
investment, a Visa spokeswoman said in an email.
The disclosure of Visa's stake, coming ahead of a regulatory
filing deadline, was a balm for a struggling stock.
Shares of San Francisco-based Square have been volatile since an
early surge after its IPO in November, as the market tries to
figure out how to value a business that blends elements of a
financial-services firm and a technology firm. Other so-called
fintech companies, such as LendingClub Corp., have been whipsawed
in trading since their IPOs.
Visa, which is based in Foster City, Calif., hasn't historically
acquired companies like Square, which can act as agents to bring
merchants onto the networks of Visa, MasterCard Inc., and other
card networks. Still, in a note on Friday, BTIG stock analysts said
the Visa disclosure this week "served as a vote of confidence" in
Square's business and "a reminder of [Square's] attractiveness as
an acquisition target" as big technology firms build out their
electronic-payments capabilities.
Square got its start with a small piece of plastic that plugs
into smartphones and lets anyone accept payment via credit or debit
cards. Visa first invested in Square in 2011 because it saw the
company as a way to help covert small businesses that only accepted
cash to accepting credit cards through Square's devices, the
companies said at the time.
Visa, meanwhile, has focused more on digital efforts lately as
consumers increasingly migrate to electronic payments. The company
has launched Visa Digital Solutions, an initiative geared toward
secure payments using mobile devices. It also has supported Apple
Inc.'s Apple Pay service.
Investors typically convert Class B shares only when they are
selling. Should Visa convert its Class B shares of Square into
Class A stock, the company would become Square's second-largest
holder of Class A shares behind mutual-fund giant Capital Research
and Management Co., which has a 12% stake in Square, according to
FactSet data.
Visa's filing was a statement of an existing position, known as
a 13G; such quarterly filings must be made by next week. Other
early Square investors including venture firm Sequoia Capital and
J.P. Morgan Chase & Co. also have recently filed 13Gs.
Despite potentially owning nearly 10% of Square's publicly
traded shares, Visa's stake only represents about 1% of Square's
overall share base. The exact figures of Visa's stake weren't
disclosed at the time of Square's IPO.
Square shares rose 7.9% to $9.30 in Friday trading in New York,
representing a return on the company's IPO price of $9 per share.
Visa shares climbed 2.9% to $70.42.
Square's IPO pricing was well below where the business was
valued privately. In first-day trading the stock jumped 45% to over
$13. This year, it has fallen 30% and has traded below its IPO
price due in part to concerns about the sustainability of the
company's growth and global market turmoil.
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Greg Bensinger contributed to this article.
(END) Dow Jones Newswires
February 13, 2016 02:48 ET (07:48 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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