Credit card giant Visa Inc. raised more than US$17 billion Tuesday in the largest share offering in US history but short of world’s largest IPO – the US$21.9-billion offering by Chinese bank ICBC (Industrial and Commercial Bank of China), on Shanghai and Hong Kong stocks markets in October 2006. Visa Inc. sold 406,000,000 shares priced at US$44 each, raising nearly US$17.9 billion and will begins trading on the New York Stock Exchange on Wednesday under the ticker symbol “V”. So, watch out for the stock’s performance.

The stock price was higher than the expected US$38 to US$42 a share, a sign of the strong demand for Visa’s shares. After deducting underwriting discounts, commissions, estimated offering expenses and other miscellaneous costs, Visa expects net proceeds from the offering to be approximately US$17.3 billion. Underwriters of Visa’s IPO have a 30-day option to purchase up to 40,600,000 (10% of IPO) additional shares, which would bring Visa an additional US$1.7 billion.
The IPO was led by JP Morgan Securities, Goldman Sachs, Banc of America Securities, Citibank, HSBC Securities (USA), Merrill Lynch, UBS Investment Bank and Wachovia Securities. Visa Inc. is actually owned by a consortium of banks and the biggest winner from the IPO is definitely JPMorgan Chase & Co. who happens to be Visa’s biggest customer and shareholder. JP Morgan is expected to receive a whopping $1.25 billion from the IPO – just 20% of this amount is enough to pay for Bear Stearns Co.

Visa Inc.’s (NYSE: V, stock) rival, MasterCard Inc., went public two years ago and was trading at $210.25 Tuesday – quintupled since it went public. Visa Inc. however is bigger than MasterCard and is the world’s largest electronic payment and credit card company. Visa processed 44 billion transactions totaling $3.2 trillion while MasterCard Inc. (NYSE: MA, stock) only handled 23.4 billion transactions totaling $1.9 in 2006. Nevertheless Visa suffered an $861 million loss on revenue of $5.2 billion in its last fiscal year ended Sept. 30 2007 due to legal expenses.

This is definitely a great time to buy the stock (or options?) as long term investment. Even if Visa Inc. stock is to appreciate only half the value of MasterCard, it’s still a good investment, no?

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March 19th, 2008 by financetwitter

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