SAN FRANCISCO – Visa is planning to issue mandatory redemption of as much as two-thirds of the shares being issued to credit unions and banks in its pending initial public offering, limiting the potential gains from the expected run-up of the new shares.
This means credit unions will not be able to share in the multi-billion windfall of the Visa IPO as they did in the 2005 MasterCard IPO, which soared by 500% after shares were issued to credit union and bank card issuers.
Hundreds of credit unions are being issued Class B shares in the IPO, but Visa said it will redeem much of those shares in order to create a reserve fund to pay billions of dollars in settlement costs for pending litigation. Each of the Class B shares will be valued at 0.72 of a Class A share, which will be sold to the public for as much as $42 each in the IPO–setting the value of the Class B shares at approximately $30.
Visa has refused to say what portion of the Class B shares will be subject to redemption, but a prospectus filed with the Securities and Exchange Commission said as much as two-thirds of the shares being issued to credit unions and banks will be redeemed in October.
