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CASE STUDY 3
Visa B Contingent Private Shares
Situation
As part of Visa’s IPO in 2008, two forms of stock were issued to members (a) publicly traded Class A common shares and (b) restricted Class B common shares. The B Shares were issued and designed as a contingent equity mechanism through which Visa members would assume proportionate liability for unresolved domestic litigation outstanding at the time of the IPO. The B Shares hold-back value that would have otherwise been available to members but for members’ responsibility to reimburse Visa for any actual litigation costs in specific U.S. legal cases in which Visa is a defendant. Shares will convert into Class A common upon final resolution of litigation.
Haybeach Advantage & Value-Add
No Price Transparency. Purchases are directly negotiated with original credit union and regional bank holders.
Little competition exists as shares do not trade on any exchange and only registered B Share holders are allowed to own the shares. Haybeach owns a recognized legal entity enabling it to purchase shares.
Haybeach is active in other complimentary assets in the Visa/MC complex allowing it to have a full picture of the remaining issues before conversion.
Sellers have limited understanding as to the current and future value of the asset and have held since 2008 due to trading restrictions.
Outcome
Recent settlement with Amazon resulted in resolution of one of the largest remaining opt-out parties. 50% of opt-outs have now settled with additional settlements expected before year end.
Visa has become more aggressive in resolving the remaining opt-outs as it seeks to reduce anti-trust exposure hampering growth plans.