Visa is expected to buck America's suffering stock market in spectacular fashion today with the completion of the country's biggest ever stock market flot-ation. The credit card comp-any has raised $17.9bn (£8.9bn) with the placing of 406 million shares – just over half of the company – at $44 each, above the expected price of $37 to $42. The shares are likely to begin trading today on the New York Stock Exchange.
The success of the deal will be greeted with relief by investors in desperate need of good news after the collapse of Bear Stearns and will be seen as a bellwether for the stock market amid one of its most tumultuous periods in recent memory. New stock market flotations have come to a virtual standstill in America as the banking crisis has deepened.
The float is easily larger than the previous record holder, the $10.6bn offering of AT&T shares in 2000. The biggest winner from the float will be JP Morgan Chase, the Wall Street giant that agreed this week to buy Bear Stearns for just $236m. The bank, which is handling the float along with Goldman Sachs, is its largest shareholder with 23 per cent and is expected to net more than $1bn from the offering. Other major shareholders, including Bank of America, Citigroup, US Bancorp and Wells Fargo, are also set for windfalls which will be welcome amid expectations of further bad debt writedowns in the banking sector.
Yet Visa does not come without risk. Indeed, the primary purpose for the listing, according to its prospectus, was to build up a cash pile to pay possible damages from more than 50 class action lawsuits and complaints it is facing over interchange fees in Europe, South and North America, Asia and the UK. These are the charges the company levies on merchants each time a customer uses a Visa card.
The extent of the damages being sought by the various government and consumer bodies, which argue these have been set at artificially high levels for years, is unclear. They could be vast. Visa admitted in its prospectus that "several of the complaints allege that the plaintiffs expect that damages will range in the tens of billions of dollars". It added: "Because these lawsuits were brought under the US federal antitrust laws, any actual damages will be trebled and Visa... may be subject to joint and several liability among the defendants if liability is established."Reuse content