Square Stock up 8% on News of Visa’s Stake

The disclosure of the size of Visa's 2011 investment fuels speculation about its plans with the mobile payments startup.
Matthew HellerFebruary 16, 2016

This article originally stated an incorrect month and year for Square’s IPO. It has been corrected.

Visa has disclosed the size of its stake in Square, fueling speculation about its plans with the mobile payments startup in which it invested in 2011.

In a regulatory filing, Visa said it acquired some 4.19 million Class B shares that do not publicly trade and has the right to convert 3.52 million of them to publicly-traded Class A shares, which would give it 9.99% of the share class.

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Square previously announced Visa’s investment in April 2011 but didn’t reveal terms. The company, which makes a plastic device that allows mobile phones to accept debit and credit card payments, went public in November 2015.

Some analysts said the disclosure of the stake highlights Square’s appeal as a takeover target. In trading Friday, Square’s stock rose 8% to $9.31, above its $9 initial public offering price but still down 29% so far this year.

“Square has long been seen as a takeover candidate, both from financial industry players like Visa or PayPal and from tech giants seeking to stake their claim in the mobile payment arena,” The Motley Fool said, adding that “it’s certainly not impossible that [Visa and Square] could forge a closer bond in their joint fight against PayPal in the future.”

But Gil Luria, managing director at Wedbush Securities, said the disclosure could mean that Visa plans to sell its shares.

“Visa is not in the business of owning publicly-traded companies,” he told the Los Angeles Times. “Clearly, they’re not interested in owning Square, either.”

Should Visa convert its Class B shares of Square into Class A stock, the company would become Square’s second-largest holder of Class A shares behind mutual-fund giant Capital Research and Management, which has a 12% stake in Square. But Visa’s stake only represents about 1% of Square’s overall share base.

Visa first invested in Square because it saw the company as a way to help convert small businesses that only accepted cash to accepting credit cards through Square’s devices, the companies said at the time.