Visa Stock Is Worst Dow Performer. A Possible Exchange Offer Is Why.

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Jefferies analyst Trevor Williams believes Visa’s potential exchange offer could create an overhang for the stock.

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Visa stock is tumbling Thursday as analysts weighed in on the possible outcome of a potential exchange offer for shares held by banks.

Visa (ticker: V) announced after the market close Wednesday that the card company is in discussions with stockholders to possibly allow big banks to exchange up to half their shares of Visa’s class B stock, which don’t trade publicly, into class A shares, which trade on the New York Stock Exchange. If the plan moves forward, holders of all class A, B, and C shares will have an opportunity to vote on the required amendments, Visa said. Class B shares are owned by domestic banks, while class C shares, which also don’t trade publicly, are owned by non-U.S. banks.

Visa created a three-class common stock structure composed of Class A, B and C shares with its 2008 initial public offering. The Class B stock was created to protect class A and class C holders from certain pre-IPO litigation.

Morgan Stanley analyst James Faucette wrote in a research note Thursday that he believes the potential exchange offer would be “advantageous” for all of Visa’s stockholders.

“For class A and C shareholders, the exchange would reduce the overhang related to the uncertainty of when and how class B shares eventually become converted and publicly tradeable float,” Faucette said.

Faucette rates Visa stock at Overweight with a $292 price target.

Not everyone on Wall Street agrees. Jefferies analyst Trevor Williams rates Visa stock at Buy with a $280 price target, but wrote in a research note Thursday that he believes the exchange would create an overhang for the stock.

Visa stock is falling 2.7% Thursday to $241.49. The stock was the worst performer in the Dow Jones Industrial Average, and second-worst performer in the S&P 500.

Write to Angela Palumbo at [email protected]

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