Last night credit card network Visa set a new record for the biggest flotation in US history: its shares priced at $44 each, above the top of their expected range, to raise an eye-watering $17.9bn. That’s about $7bn more than anyone else has ever managed. What’s more, in its first day of trading on the New York Stock Exchange on Wednesday (where it will use the ticker ‘V’), the shares shot up by a third to around $60 as investors clamoured for a piece of the action – so anyone who bought at the offer price has already made a killing.
Investors are betting that Visa’s global network puts it in pole position to cash in as customers move away from cash and cheques towards electronic payments (which some think will account for about 70% of all transactions by 2010). And unlike other businesses in the financial sector, it’s not at risk from the credit crisis because it doesn’t issue any cards itself – so it steers well clear of those unreliable borrower types. ‘We believe Visa is well positioned to build upon our past success and take advantage of this migration,’ said chairman and CEO Joseph Saunders today, no doubt trying to stop smirking at the thought of how rich he’d just become.
The only cloud on the horizon for Visa is a legal one. It’s been forced to put $3bn in a special piggy bank to cover the costs of various lawsuits currently pending against it, mostly from smaller rivals accusing it of anti-competitive behaviour.
Still, this week’s float (which could raise over $19bn if the arranging banks buy some extra shares themselves) will provide a welcome cash boost for Visa’s six biggest shareholders, most of whom have been caught up in the recent sub-prime shenanigans. JP Morgan, Bank of America and Citigroup, along with fellow banks Wells Fargo, National City and US Bancorp, saw their combined 58% stake valued at more than $10bn. Even if they hold on to a portion of their stake, that’s still going to mean a serious windfall – just what you need when global financial turmoil is tearing big holes in your balance sheet.
After a stream of doom and gloom from the US recently, this has definitely been a major good news story. As were today’s Morgan Stanley results, which saw the bank became the third this week to reveal better-than-expected quarterly profits. But although the market rallied briefly, falling oil stocks soon sent Wall Street back into negative territory. Clearly it will take more than a bit of plastic surgery to get the US economy back on track...