Visa, 3 Months Later: Where That IPO Money Went

It’s three months later, and we’re finally learning what all of that IPO money was for.

When Visa (V) IPOed in March, the company reserved $3 billion of its jaw-dropping, record-breaking $19.7 billion public offer for what it called a litigation fund, and now we know why.

Court documents finally went public this week, and it turns out that Discover (DFS) is suing opponents Visa and Mastercard (MA) for anti-competitive practices.

American Express (AXP) already took a couple of legal punches at the dynamic duo of bank cards, and Visa paid AmEx more than $2 billion to drop its name from a lawsuit that’s now only filed against Mastercard. That leaves a billion for Discover if the company wants to use the rest of the Visa IPO litigation fund to stay out of court on this one, too.

Discover says Visa and Mastercard conspired to prevent banks from offering rival credit cards. According to the lawsuit, they convinced banks it didn’t pay to Discover. (Sorry. I couldn’t help myself there.) And both suits are coming after the U.S. Supreme Court upheld a lower court ruling in 2004 that Visa and Mastercard violated antitrust laws. (Of course, this isn’t the first time Visa has been accused of antitrust practices.)

If Visa doesn’t settle out of court on the Discovercard suit, the situation could get pretty pricy. As an antitrust case, Discovercard could pursue triple damages from its competitors.

The Discovercard lawsuit is set to go to trial later this year. We’ll see if Visa can manage to pay its way out of the situation before then.

Disclosure: none

Comments

[hotdog:]

You apparently don't do very good research. Visa made sure their exposure is limited and they only have to pay a fixed amount of any settlement and the banks that formerly owned Visa before it went public are at risk for the rest. Mastercard on the other hand did not make such an arrangement is much more at risk. Get your facts straight before reporting erronious facts.

2008 Jun 12 08:56 AM

[Roudy:]

I still appreciate your efforts to report things like this to us."Hotdog" may have a point but I know your intentions are good. Keep up the good work. RoudMan

2008 Jun 12 09:23 AM

[roy_mcd:]

I will have to read the achives, but I believe the 3Billion was set aside befor Visa went public, and is not part of the monies from the initial public offering.

2008 Jun 12 10:25 AM

[Vegasjoe:]

So should I go long Discover and short Mastercard? Long Visa and short Mastercard?

2008 Jun 12 11:23 AM

[Relax...:]

You guys need to chill out. No need to leave negative, derogatory comments. Add to the discussion with constructive info and leave the emotional rheteric out. There's enough other stuff to read out there if you don't like what's being written.

2008 Jun 13 03:17 PM

[cher50:]

Just a few yrs. or so...ago, I stayed out of Mastercards IPO a little down the line because of "rumors" and financial news on the lawsuit business....guess what? I'm not falling for it this time. Love my 560 shares of Visa...it can drop down to fifty, bring it on, I'll buy more! Go Visa, this redheads there to stay & play!

2008 Jun 13 06:26 PM

[Adesai:]

Oh my god...........so all the talk about litigations for the past 3-4 months were true!!!!!!! What are we going to do now????????? We should all SELL visa and BUY discover.......hahahha... This is the most uninformative, uneducated article.

2008 Jun 14 07:17 PM

[Cat~eyes:]

Play nice guys and gals.. :)
The entire point here is to share knowledge and to correct misinformation with solid facts and research.

If any of you Visa share owners are interested in learning more about Visa, sharing your thoughts and data with a group of Visa investors, come on over to
VisaGlobalWinners.blog...
We'd love to hear from you to share your ideas and knowledge about Visa and other market-related items!

2008 Jun 15 08:32 PM

[NetWkEng:]

Go Visa !!!!!!!!!!!!!!!!!!!!!!

2008 Jun 19 02:48 PM