Visa Inc Buys Stake of Close to 10% in Square

Visa Inc has acquired a stake of nearly 10% in Square Inc the mobile-payments company, according to a Thursday regulatory filing submitted to the Securities and Exchange Commission.

The global financial and credit card services firm is now the second largest Square shareholder, with the largest being Capital Research and Management Co. which is the massive mutual fund business in Los Angeles.

The move by Visa Inc is a big vote of confidence for Square, which is based in San Francisco and has struggled in the financial markets since its initial public offering in November of last year. Its stock was $9 when the IPO debuted and shares increased by 45% the first day of trading. However, since then they have slid down.

Square’s shares were up 7% or 60% to $9.22 Friday morning on Wall Street.

Square manufactures a device made of plastic that allows a mobile phone to accept payments by credit card. It generates most of its revenue from restaurants, retailers and other businesses that pay it a fee to process the payments.

A very fast growing business is mobile transactions using credit, debit and other payment cards. However, there are concerns over the economic growth worldwide and the valuations of the many tech companies have cut into a number of stock valuations from Apple to Square to Qualcomm to Intel.

Prior to its November IPO, Square had reported that losses increased in 2014 to more than $154 million on revenue of more than 850 million.

In 2013, losses were said to be $105 million with revenues reaching over $552 million.

Jack Dorsey is the CEO at Square. He also serves as the CEO at Twitter Inc where he was one of the co-founders.

Some analysts suggested that the association of Square with Dorsey, who is attempting to turn the microblogging company around might also be hurting Square’s stock price.

SOURCE:FINANCIAL MARKET NEWS