"V" Is For Visa's Victorious $18 Billion IPO

Implications: Visa beats expectations to raise $17.9 billion in its IPO and makes the record books as the largest U.S. IPO, amidst a shaky US financial market. Visa's long awaited IPO sparked a great deal of interest from investors  seeking a potential growth opportunity amid a bearish economic climate. In 2006, Visa's global consumer volume surpassed 59 billion transactions valued at $4.4. trillion. Approximately $828 billion of this volume occurred in the US and trends show volume is up by 14% over 2005 and continues upward. Visa is hoping that consumers' will continue to bring their Visa debit and credit cards for everyday purchases as higher transaction volumes and higher transaction fees are expected to drive Visa's growth over the next 5-8 years and Visa plans to capitalize on the trend of consumers shifting their payment preferences from cash and checks to debit and credit cards. Visa and MasterCard has been the biggest drivers of consumers' shifting from paper to plastic purchases.

Analysis: Visa's shareholders will receive a financial windfall thanks to Visa's successful IPO, as Visa makes its debut on the NYSE on Wednesday, 3.19.08 and it couldn't come at a more opportune time for these banks, who suffered major writedowns in 3Q and 4Q07. JP Morgan Chase who owns 23.3%; Bank of America owns 11.5%; National City Corporation owns 8%; Citigroup owns 5.5%; U.S. Bancorp owns 5.1% and Wells Fargo owns 5%. The big banks priced the deal to sell because most of them are cash strapped due to recent writedowns and loss in market cap.
1.  Visa owns roughly 45% market share and the new Visa Inc. will include the Canadian, U.S. and International Operations and the European Unit will take a minority stake in Visa. Barclays, Visa's largest European card issuer is also expected to gain a huge windfall from Visa's IPO

2.  Visa priced its IPO higher than its rival MasterCard and doesn't expect to grow as fast as MasterCard has grown since its IPO in 2006. MasterCard's share price has grown by over 350% since its debut

Takeaway:  Although the IPO market has been soft since the beginning of 2008 due to fears of a recession and weak market conditions, Visa's brand and attractive valuation should bode well for a successful debut. Investors may have a huge appetite for Visa's shares thanks to Visa's growth in emerging markets coupled with its 45% market share and the continued growth of debit and credit cards transaction volumes, which are projected to more than double by 2010.