Capital Markets

Visa Plans $18.8 Billion IPO

In a slowing economy, Visa aims to launch one of the world's largest initial public offerings.
Stephen TaubFebruary 25, 2008

Bear market? If there is one, Visa Inc. doesn’t seem to notice. The credit-card network company filed plans to raise as much as $18.8 billion in what would likely be the largest initial public offering on record in the United States.

Visa plans to sell 406 million shares for between $37 and $42 per share. This would result in proceeds of $15.6 billion, or $17.1 billion if the underwriters exercise their option to purchase additional shares in full. To reach that amount, the initial public offering price would have to be at least $39.50 per share — the midpoint of the proposed range — after deducting the underwriting discounts and commissions and estimated offering expenses.

The company said it intends to set aside $3 billion into an escrow account to cover litigation.

Following the completion of the offering, Visa plans to use $10.2 billion of the net proceeds to redeem more than 123 million shares of class B common stock and 143 million shares of class C common stock It will use the balance of the net proceeds for general corporate purposes.

If Visa is able to complete the deal, it would exceed the $10.6 billion offering in 2000 by AT&T Wireless Group, which is the largest in the U.S., according to website IPO Home. The Industrial and Commercial Bank of China raised $19 billion in its IPO in October 2006, noted Motley Fool.

Visa’s timing is curious. It comes as the economy is slipping and potentially falling into a recession. Indeed, the sputtering economy could lead to more delinquencies on the part of its cardholders. Furthermore, investors are clamoring for equities, although this deal could help to jump-start a rebound.

However, Visa and its investors no doubt are mindful that shares of arch-rival MasterCard Inc. have more than quintupled since they went public in May 2006. “MasterCard has been an explosive stock, and investors may hope Visa will be the same,” Steve Roukis, a managing director at Matrix Asset Advisors, told Reuters.

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