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.

[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

[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.

[Vegasjoe]

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

[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.

[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!

[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.

[Cat~eyes]

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

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[NetWkEng]

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