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Marketbeat |
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WSJ.com’s inside look at the markets |
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February 25, 2008, 11:10 am |
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Visa Cashes In |
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Posted by David Gaffen |
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Credit Cards |
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It’s difficult to look at the news of an upcoming initial public offering from Visa and not be a bit cynical. After all, the economy is in the midst of a great unwinding of credit, and consumers are pulling back on spending after years of racking up debt through credit-card purchases. |
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What better time for the nation’s largest credit-card issuer by market share to sell an estimated $17 billion in shares, which would be the largest IPO in history in terms of proceeds? In addition, it’s not really as if the company is planning on using the money from the offering to expand the business, or even to pay down debt. |
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Largest IPOs in History |
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Stock Date Deal Size (Bil) |
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At least $10 billion of it, and perhaps more than $12 billion, will be used to buy back their own Class B and Class C shares from major shareholders — the banks. "It’s a great way for the banks to raise money," says Francis Gaskins, CEO of IPOdesktop.com. "It’s pretty transparent." |
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The biggest holder of Class B shares is J.P. Morgan Chase, one of the underwriters; it currently has 93.1 million in Class B shares, but will own 64.5 million in Class B shares after the offering. Other major stakeholders include U.S. Bancorp, Citigroup and National City, and it’s not a stretch to say the banks won’t look askance at a big infusion of capital right around now. |
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Less assured is the path the stock will take. Shares of its main competitor, Mastercard, have nearly doubled from this time a year ago. American Express, however, was lately traded at $44.43, not far from its 52-week low of $41.15, and Discover Financial Services, which went public through a spin-off in June, was lately at $15.03, compared with a 52-week high of $32.17. |