Reading The SEC Filing Tea Leaves: What To Make Of New Visa/Square And Amex/Costco Details?

As a business reporter, nothing is more relaxing than sitting back with a pile of freshly-filed SEC documents and digging in. But two different filings this week—related to Visa/Square and Amex/Costco—may have raised a lot more questions than they answered.

Let’s start with Visa disclosing the particulars about its equity stake of Square.  The filing said Visa now owns about 4.19 million of Square’s Class B shares. The percentage of ownership that those share reflect is muddled in the intricacies of Wall Street. It might be as high as 10 percent or a lot lower, depending on what other Square stakeholders do.

The Motley Fool offered the best explanation. “Visa’s stake could be as large as 10 percent of Square’s outstanding Class A shares if Visa converted its Class B shares and if no other shareholders owning Class B shares chose to make conversions at the same time. That was the basis for reporting the stake to the SEC in the way it did. However, Visa said that if other shareholders who own Class B stock chose to convert to Class A shares at the same time that Visa did, then its overall stake in Square would be much smaller. The credit card giant said that on the whole, its financial stake in Square amounts to about 1 percent on a fully diluted basis.”

Let’s set aside the numbers for the moment. Visa has a slice of Square and has had it for years, as the cardbrand has previously disclosed. There was never a need to disclose the exact size of Visa’s investment or the equity stake because Square was privately held at the time of the investment and it certainly wasn’t material to Visa.

That forces the question: Why disclose the numbers now? The announcement did send Square shares soaring—briefly. But much of that was based on confusion from initial reports that Visa was upping its stake—rather than merely revealing the number of what it has always had.

Was the choice to file the particular numbers now and to detail the precise level of equity (OK, “precise” is a relative term) it controlled in one the most well-known payment facilitators in the world to send a message to the market? To rivals? Was it a chance to remind the market of Visa’s stock?

Another interesting filing this week came from American Express and shed a sliver more light on what it is having to give up from its Costco deal. The Amex SEC filing put the value of the retail chain’s business into context. The combined Costco shoppers’ revolving credit card balances hit $13.9 billion as of the end of last month, down from $14.8 billion one year earlier. Here’s a little perspective: Amex reported its entire revolving balances at $60.4 billion as of the end of last month, meaning that Costco represented almost one-fourth of those dollars. Ouch!