The Visa IPO
Many people have asked: so when is Visa going public? While Visa would love to make it February, the reality is that it’s closer to early May, 2008. In light of MasterCard’s near 500% stock growth rate in 18 months and due to the fact that Visa is a much stronger name, rumors of its potential is just incredible. This blogger is expecting a target opening price of $80 to $120 a share, with a one year estimate of $500 share. Mind you, if Visa finds themselves in unexpected territory with a slew of new lawsuits, then all bets are off.
It was a great decision to let MasterCard take the first shot at the IPO game, it could backfire, as few expected MasterCard’s growth and now that they are anticipating it with Visa, the lawyers may just be lined up to sue in light of all the current troubles in the merchant services arena.
So, a May IPO with a target price of $80 to $120. Heck, they may start to get aggressive and it becomes April, but expect a May IPO, in this blogger’s prediction.
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Comment by Bruce on 31 December 2007:
VISA took a big hit in their 2007 Y/E financials (around $2B) to settle a huge outstanding lawsuit before they went public and this put them in the hole around $800M I believe. They’ve set aside $650M for 2008 in case they lose the other litigation theyre up against.
I’m not aware of any other pending litigation and if you adjust their 2007 earnings for the settlement, they would have earned over $1B I believe—not bad.
Some analysts have recently written that most US households aren’t as heavily weighed down with credit card as the conventional wisdom would have us believe. Rather, most households are apparently keeping their credit cards open for emergencies in case of layoffs and/or huge interest rate spikes.
Given the federal bailout options for subprime mortgages and the continuing low interest rate climate, I don’t see huge consumer credit card defaults on the horizon—at least not for 2008. The key for the VISA IPO will be how the start price looks from a P/E ratio. MasterCard’s start price landed at around 28 in May 2006.
A VISA start price in the $80-$120 range seems reasonable, but it’s anyone’s guess as to whether it will experience the same rapid (18 months) run-up as MasterCard did, regardless of any litigation that may be waiting in the wings. However, it would probably be a pretty safe bet in the long run.
Comment by Riley Poole on 31 December 2007:
Visa always has pending litigation, it’s unfortunate but some idiot always feels victimized by Visa or MasterCard for some crazy thing or another. They did set aside more than $2 billion for the settlement with American Express so it’s going to be interesting to see how the actual IPO plays out. I can’t imagine it not working out much better than MasterCard simply as Visa generates more revenue and more profit than MasterCard does with higher growth rates and more potential. It’s just my opinion but I think Visa will be fine.