Visa Looks for a Record IPO in Defiance of Wall Street Headwinds

Facing financial markets that have been roiled by troubled subprime mortgages and a weakening economy, Visa Inc. on Monday said it is seeking to raise $15 billion to $17 billion in its upcoming initial public offering of common stock?an amount that even on the low end would be a record IPO. Visa's stunning disclosure came in an amended registration statement the No. 1 payment network filed with the Securities and Exchange Commission Monday morning. Visa earlier had indicated it wanted to raise at least $10 billion (Digital Transactions News, Nov. 10, 2007). The new filing says Visa plans to sell 406 million shares to the public at $37 to $42 per share. The Class A shares would represent a 50.2% stake in the company. Visa's long-time financial-institution owners will continue owning the rest of the company for the time being. With another 40.6 million shares available for sale depending on investor demand, the IPO could raise $18.8 billion on the high end. That would make Visa's IPO nearly as big as the two biggest IPOs to date combined, according to the Associated Press?AT&T Wireless in 2000 at $10.6 billion and Kraft Foods in 2001 at $8.7 billion. The question is, in today's financial climate, can Visa even get the low end of its projections? For the answer, look at Visa rival MasterCard Inc., which went public in May 2006 and raised $2.4 billion in the first IPO of a bank card payment network. Despite some pressure on its stock in the past three months, MasterCard is still up by about 400% since its IPO. By going second, Visa has the benefit of being able to assess the market's value on a pure payment network. “They can definitely do it,” says Michel Kon, an equity analyst at Chicago-based Morningstar Inc. “MasterCard, if you look at their shares, they weren't hit that hard by the marketing turmoil that hit this year.” While stock prices are influenced by many factors, the main driver continues to be the growth in revenue-generating transaction volume shifting to credit and debit cards from cash and checks around the world, according to Kon, who also notes that Visa and MasterCard don't make consumer loans via credit cards. “I don't think there's any recession that can derail this,” he says. He also notes that Visa has taken steps to reduce its legal exposure to various large judgments, including a big settlement with American Express Co. (Digital Transactions News, Nov. 7, 2007). A Visa spokesperson says the company would not comment about the filing. The date of IPO still hasn't been set, though it is expected this year. Visa paved the way to the IPO last year by reorganizing its regions. Visa's region in Western and Northern Europe will continue to be owned by financial institutions there.