Visa stages largest US IPO

By Anuj Gangahar in New York
Published: March 18 2008 22:45 Last updated: March 18 2008 23:46
Visa Inc, the world’s largest credit card network, on Tuesday set a record for US initial public offerings by raising $17.9bn, providing a welcome windfall to several prominent US banks.
Visa had decided to go ahead with the offering in spite of recent nervousness in equity markets and the continuing threat of a global economic slowdown. Tuesday’s pricing came after financial shares rallied strongly on hopes that the worst of the recent credit market turmoil might be over.
The company’s shares priced at $44 per share, which was above the pre-IPO range of $37 to $42. They will begin trading under the ticker “V” on the New York Stock Exchange on Wednesday.
If the company decides to float its share overallotment – an additional 40.6m shares – the IPO would raise as much as $19.65bn, almost double the $10.6bn record for a US listing set by AT&T in 2000. The proceeds from the IPO will help leading banks boost their profits at a time when credit market problems have reduced revenues from many of their traditional activities.
JPMorgan Chase, which this week agreed to buy Bear Stearns for just $2 per share in a fire sale engineered by US regulators, stands to make a gain of about $1.2bn as Visa’s largest selling shareholder. Bank of America will make about $600m and Citigroup $300m. The banks will cash in about half their stakes.
Analysts said Visa and rival MasterCard are insulated from rising defaults and late payments because, unlike American Express and Discover Financial Services, neither of them actually extends credit to cardholders. The banks that issue the cards take the credit risk.
Some analysts had said the company’s US bank shareholders may have put pressure on the company to proceed after the banks suffered heavy writedowns as a result of the US credit crisis.
About $3bn of the proceeds will go into a fund to protect investors from legal claims. Visa faces legal actions alleging anti-competitive practices.
JPMorgan and Goldman Sachs are the lead underwriters of the issue. Bank of America, Citigroup, HSBC, Merrill Lynch, UBS and Wachovia also worked on the flotation.