Visa stock price sinks as $5.3 billion acquisition of Plaid is off

Written by: Michael Harris
January 18, 2021
  • Visa and Plaid announced they are dropping their proposed $5.3 billion merger amid regulatory concerns
  • The DoJ claimed that the deal would “eliminate a nascent competitive threat”
  • Visa stock price closed 3.58% lower on Thursday to increase the weekly losses to over 6%

Shares of Visa (NYSE: V) are trading over 6% lower this week after the payment-processing company said it is giving up on plans to acquire financial services company Plaid amid regulatory hurdles. 

Fundamental analysis: Visa loses patience 

Beginning of the last year, Visa announced it is acquiring Plaid for $5.3 billion. However, the acquisition plans hit a major stumbling block last November when the Department of Justice (DoJ) filed a lawsuit to stop the deal.

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Accordingly, the DoJ claimed that the deal would “eliminate a nascent competitive threat”. Finally, two companies announced this week that they jointly made a decision to abandon the deal.

“We believe the combination of Visa with Plaid would have delivered significant benefits, including greater innovation for developers, financial institutions and consumers. However, it has been a full year since we first announced our intent to acquire Plaid, and protracted and complex litigation will likely take substantial time to fully resolve,” Al Kelly, chairman and chief executive of Visa, said.

Plaid is likely to continue focusing on the growth of its rapidly-evolving business as it recorded “an unprecedented uptick in demand for the services powered by Plaid.” According to the company, its customer base soared 60% last year as it now counts over 4,000 clients. 

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Technical analysis: Price corrects lower 

Visa stock price closed 3.58% lower on Thursday to increase the weekly losses to over 6%. More importantly, this week’s plunge pushed the price action below the 100-DMA that currently trades at $205.27.

Visa weekly chart (TradingView)

This technical indicator will now act as a resistance line during the next leg higher. On the other side, a strong support area is located near $196.00 where the ascending trend line and 200-DMA meet.

Summary

Visa and Plaid announced they are dropping their proposed $5.3 billion merger amid regulatory concerns from the DoJ.