What’s in a Name?

Checking in on the Cielo/Cielo lawsuit

By Travis Johnson, Stock Gumshoe, October 15, 2014

Cielo (CIOXY for the US ADR) is the biggest Brazilian credit card processor, they make their money primarily by adding merchants to their transaction network (leasing them the card swipe machine and processing the payments through whatever credit or bank card they use), and by getting a tiny slice of each payment.

They came into being in this current incarnation about four years ago, when the Visa and Mastercard payment networks were being spun out by the big Brazilian banks and when the rules were being modernized to get rid of the payment monopolies — Cielo used to be called VisaNet, and they were the only processor of payments on the Visa brand and network in Brazil… their largest competitor was and is called Redecard, which did the same thing for Mastercard. Once the monopolies were busted up, these two companies (both publicly traded, with major ownership by large Brazilian banks) became competitors. And VisaNet changed it’s name to Cielo.

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Now that’s turning into a big deal, because the biggest non-soccer athletic star in Brazil is Cesar Cielo, the world champion swimmer, and VisaNet had a marketing deal with him when they decided to change their name and rebrand the company, very consciously combining the rebranding with his name… but apparently there was some dispute in there, or some feeling of inadequate payment, because he has been fighting in court to get them to change their name. And today, he won a ruling from the courts and Cielo shares fell by 7% or so.

I won’t pretend that I know how this name thing is going to shake out — it is still on appeal, and Cielo can reportedly continue using the name on appeal. But this is not a consumer credit company — their customers are merchants, most of whom have a pretty tight relationship with Cielo (you can change processing companies, get a new machine, set up new accounts, etc., but it’s not necessarily something you’d do every month or every year), and I would assume that any hit from a possible name change would be relatively minor and would not linger for very long. But more importantly, it seems ridiculous that Cielo can’t make a deal with Cielo. I don’t know if Cesar Cielo is opposed to the company in some way and trying to punish them, or if he ...

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