Visa has announced an $18.8bn (£9.5bn) fundraising that will rank as the biggest initial public offering ever seen in the US. It comes as the credit crisis continues to destabilise financial markets, and in the middle of an otherwise arid spell for stock market flotations.
The credit card network unveiled details yesterday of its hotly anticipated offering, which has been in the works since 2006 and follows two years after its smaller rival Mastercard floated on the New York Stock Exchange. Investors are hoping Visa will emulate the success of Mastercard, whose shares have risen fivefold since their debut.
In a regulatory filing, Visa said it would sell 406 million shares at $37 to $42 each, raising between $15bn and $17.1bn, but it added that, if there was demand, it might sell a further 40.6 million shares, taking the total IPO proceeds to $18.8bn. On any measure, a successful flotation will eclipse the previous record of $10.6bn raised in April 2000 by the mobile phone operator AT&T Wireless.
Visa was incorporated in Delaware in 1970 as National Bank-Americard, and changed its name six years later. It is controlled by 13,300 member banks and finance companies, many of whom issue debit and credit cards using Visa to process payments. It has grown to be about twice the size of Mastercard, and more than $4 trillion is spent on Visa cards every year.
Recently the business has come under fire for its high fees, and it is embroiled in potentially damaging lawsuits in the US. Federal authorities and the rival American Express claim that its ownership structure is anti-competitive because it discourages member banks from issuing cards by other payment processors. Retailers and customers have launched class-action suits claiming that Visa and Mastercard are keeping transaction costs artificially high.
The flotation will cut member banks' shareholding to below 50 per cent, reducing their legal risk.
The timing and other financial details of the IPO remain to be settled, and could still be derailed by a sharp deterioration in stock markets, or if fears start to build about a sharp short-term fall in transactions on its network. But Visa argued yesterday that it saw continued growth despite the credit crisis, which has put consumer spending under pressure in the West and led card issuers to cut back credit limits. Visa takes a cut of all transactions, and said it saw a long-term trend away from cash and cheques to credit and debit card use, with growth set to be especially strong in developing economies.
Scott Valentin, an analyst at Friedman, Billings, Ramsey, said: "Everyone is looking for a way to play the financial space without the credit exposure. Plastic is replacing cash and cheques, including on small purchases such as a meal at McDonald's. Every time a card is used, Visa gets a piece."
According to its latest financial results, in the final three months of 2007 Visa's net income more than doubled to $424m on revenue that increased 76 per cent to $1.49bn. Visa's European operations will remain separately owned by European member banks.