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Where the Visa IPO Money Went

Posted June 11, 2008

“When Visa 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.” — Stephanie Grimmett

by Stephanie Grimmett

Baltimore – (TFN): It’s three months later, and we’re finally learning what all of that IPO money was for.

When Visa 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.

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

American Express (AXP: NYSE) 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.).

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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.

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Posted by Stephanie Grimmett · Filed Under US Stocks and Markets 

Comments

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    Discover has alleged and must prove their allegation of a conspiracy. To ask for damages in excess of its market cap is ludicrous and Sears looks desperate to even try this tactic.

    Instead of improving its business model and get out of the debt credit business that are looking for a pay off .

    Here Discover is our counter offer.... $0.00 .

    Visa Investor form NY
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