$19bn IPO on the cards for Visa

Visa is finally going public, in what looks set to be a record IPO - but why now?

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Last Updated: 31 Aug 2010

The credit card company, which has supposedly been on the verge of a flotation for ages, told the US SEC on Monday that it plans to list nearly 450m shares in its US business at between $37 and $42 each. Even at the bottom end of the range, this would be the biggest IPO in US history – while at the top end it would raise almost $19bn.

Visa has clearly been casting some envious glances at smaller rival Mastercard, whose shares have quintupled in value since it floated a couple of years ago (albeit at the much lower price of $2.4bn). And since the consortium of banks that own Visa includes JP Morgan, Citi and Merrill Lynch, they could probably do with a nice pay-day at the moment (plus they’ll still own half the business even after the float).

Visa’s the biggest player in the electronics payment market, which it says is growing at 11% per year. According to the SEC prospectus, we spent a whopping $3.2 trillion on our Visa cards in 2006, over $1trn more than on Mastercard. But $19bn still represents is still a hefty price tag – Visa made $5.2bn revenue last year, and actually ended the year $861m in the red.

One of the major reasons for this is that it’s fighting dozens of legal cases about its anti-competitive behaviour – rivals have accused it of pressurising customers not to issue rival cards. It’s already been forced to pay out nearly $2bn to American Express, and is facing another potentially costly lawsuit from rival Discover. In fact, it’s so worried that it’s already earmarked $3bn of the float proceeds for legal costs and fines – which doesn’t exactly reek of optimism.

But that’s not the only reason why it seems like a strange decision to float now. If the US economy is indeed heading towards the dreaded recession, and consumer spending slows down, surely Visa will be hit directly in the pocket? You can’t pick up a paper these days without reading that the days of cheap consumer credit are over – and that can’t be good news for a credit card company.

What’s more, it’s decided to use ‘V’ (as in Victory) as its stock market symbol – let’s hope that doesn’t come back to haunt it...

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