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Visa IPO. By: James Kenney Vice President. “Life Takes Visa”. What is VISA?. Most recognized as a leading credit card provider Owned by several different banks (i.e. BofA , JP Morgan, Citi ) Not just plastic: Global Processing Company servicing financial institutions

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visa ipo

Visa IPO

By: James Kenney

Vice President

“Life Takes Visa”

what is visa

What is VISA?

Most recognized as a leading credit card provider

Owned by several different banks (i.e. BofA, JP Morgan, Citi)

Not just plastic:

Global Processing Company servicing financial institutions

Payment Product Platforms including consumer credit, debit,

prepaid accounts and commercial payments

Serves as an intermediary between banks and card users

Generates revenue through fees charged to both merchants and card issuers

VISA and MC currently charge about 2% versus 2.5% for AMEX

The Hard Numbers

Handled Forty Four Billion Transactions totaling $3.2 Trillion, or 60% of market

Compared to $1.9 Trillion USD processed by rival MasterCard, 39% of market

visa fun fact

VISA: Fun Fact

“The Boston Fee Party” of 1991

AMEX had given favorable merchant fees to restaurants in Boston, granted they only accepted American Express cards

Restaurant owners in Boston began boycotting AMEX and insisted on using VISA and MasterCard

AMEX was charging 4% per transaction

VISA and MC were charging just 1.2% per transaction

Eventually over 250 restaurants across the US boycotted the use of AMEX, until they finally brought down their fees

ipo initial public offering

IPO: Initial Public Offering

When a company becomes “public”

The very first time a private company issues shares of stock that can be bought and sold by the public

Company will hire an investment bank to assist in the IPO process, and subsequent raising of capital

type of security to issue (common or preferred)

best price

best timing and process (i.e. “Dutch auction”)

typical deal

Typical Deal

Corporate Finance team assess the value of the company in relationship to the clients goals and timetable. They call on equity research and S&T team to predict current markets reaction to the offering and also to develop price and marketing plan

Visa plans to raise $150 million in capital by issuing stock. They invite five banks to bid for the business. They assess each competitors view and past experience. Piper wins the business!

The team decides to issue common stock at $22 per share. They also prepare a prospectus to market the offering and files registration materials with the SEC

Source: Dave Kozhuk

Visa NYSE: V shares are released to the sales force (institutional and retail) they distribute prospectus and sells shares to investors

In the final hours, the price of the shares is finally set. The syndicate desk underwrites (buys) the equity along with a group of other investments banks

visa s ipo

VISA’s IPO

First announced plans in October of 2007

VISA finally provided details of the transaction very recently: February 25th 2008

Plans to issue 406 million shares (~ 51% of company)

Target price is from $37 to $42 a share

raise anywhere from $15 to $19 billion dollars

Scheduled for the week of March 19th, 2008

why is visa utilizing an ipo

Why is VISA utilizing an IPO?

Company ownership currently includes many bulge bracket banks which have been hit hard by the sub-prime mess and the credit crunch

The $15 to $19 Billion raised will go towards alleviating some of the problems facing these banks

VISA also wants to become listed on an exchange, so that the public can buy and sell shares (ownership)

retail and institutional clients

visa s ipo1

VISA’s IPO

Would be the biggest IPO in US history and 3rd largest globally

1. Industrial and Commercial Bank of China ($22 billion) 2006

2. NTT Mobile ($18.1 billion) 1998

3. VISA ($15 - $17 billion) 2008

4. ATT Wireless ($10.6 billion, currently largest in US history)

Provide a Stimulus for the IPO market

only 18 IPO’s have happened this far in 2008

48% reduction from a year ago

visa s ipo2

VISA’s IPO

Brings back memories of MasterCard’s IPO

$39 price per share back in May 2006

MasterCard’s stock has skyrocketed 400%

Closed at $191 today

is this “priceless” ?

Some are skeptical that VISA’s IPO will result in such a huge return

what the experts are saying

What the experts are saying:

"It's a big deal being done in a bad market," says Renaissance Capital’s Kathy Smith

"It's huge. A lot of people will be watching it to see if it gets done," says Joel Greenberg, partner at law firm Kaye Scholer.

Visa's price-earnings ratio (stock price divided by earnings per share), based on the middle of its price range, is 30 times its fourth-quarter earnings, he says. That's well above MasterCard's 11 P-E at its IPO, Gaskins says. "Is this another MasterCard? The answer is no," he says. (Frank Gaskins of IPOdesktop)