Visa Stock Tumbles as Analysts Weigh Exchange Offer

Visa stock is facing a downward trend as analysts discuss the potential outcome of a proposed exchange offer for shares held by banks.

Visa recently revealed that it is in talks with stockholders regarding the possibility of allowing major banks to exchange up to 50% of their shares of Visa's class B stock (which is not publicly traded) for class A shares (which are traded on the New York Stock Exchange). In the event that this plan progresses, all class A, B, and C shareholders will have the opportunity to vote on the necessary amendments, according to Visa. It is worth noting that class B shares are owned by domestic banks, while class C shares (also not publicly traded) are owned by non-U.S. banks.

During its initial public offering in 2008, Visa established a three-class common stock structure consisting of Class A, B, and C shares. The creation of class B stock was intended to safeguard class A and class C shareholders from certain pre-IPO legal matters.

Morgan Stanley analyst James Faucette expressed optimism about the potential exchange offer, stating that it would be beneficial for all Visa stockholders. Faucette believes that for class A and C shareholders, the exchange would decrease the uncertainty surrounding the eventual conversion and public trading of class B shares. He currently rates Visa stock as Overweight with a price target of $292.

However, not everyone on Wall Street shares the same sentiment. Jefferies analyst Trevor Williams rates Visa stock as Buy with a price target of $280. In his research note, Williams posited that the exchange could create an overhang for the stock.

As a result, Visa stock fell 2.7% on Thursday, closing at $241.49. The stock performed poorly in both the Dow Jones Industrial Average and the S&P 500, ranking as the worst performer in the former and the second-worst performer in the latter.