Visa Reveals Stake In Square
Visa has a 9.99% stake in a mobile payment startup 'Square' since 2011
On February 12, Visa Inc. publicly announced that it holds a stake in a mobile payments firm called Square. It is believed that the shares of the mobile payments company showed improvement when Visa revealed its equity. The financial services corporation invested in Square in 2011 when it was not a publicly traded firm and both parties did not disclose the size of the investment.
According to the regulatory filing, Visa has nearly 4.19 million Class B shares of the startup, which are not to be traded publicly but Square can change this option if it wants. The mobile payment startup has the authority to convert 4.19 million Class B shares into 3.52 million Class A shares. Indirectly, Visa will have a 9.99% stake in the publicly traded shares of Square.
As per the normal routine, investors feel the desire to convert their Class B shares into Class A if their intention is to sell them in the coming times. The intentions of the financial service company are still unclear.
The Wall Street Journal reported that the stake revelation of Visa in the publicly traded company could be a catalyst for small and big merchants to build associations with other card networks including MasterCard and Visa.
As of now, Square deals in providing financial and marketing services to only small and medium businesses in an attempt to improve their sales. The stake revelation was indeed a good decision for both parties. Merchants would be building association with Visa cards on V’s side.
On the other hand, the disclosure improved Square’s stock in the market increased the credibility of its mobile payment technology and platform. This disclosure can also play a vital role in encouraging other card issuers such as MasterCard etc. to spend money on small businesses, which eventually would improve the payments processing method in the future.
Jack Dorsey founded the mobile payment startup and created the company with no intentions of taking on the leading card firms. The managing director at Wedbush Securities, Gil Luria, said, “Visa is not in the business of owning publicly-traded companies. Clearly, they’re not interested in owning Square, either. Visa’s initial interest in Square was a matter of keeping your friends close and keeping your enemies closer.”
Gil Luria believes that Visa has no intentions to keep its stake in Square. The reason of disclosing it was that it plans to sell shares in the near future.
