Visa IPO

Anyone else thinking about getting in on this? Might be the biggest IPO ever. Mastercard’s stock is up almost 500% from it’s IPO price. Visa is using theirs as a base, setting the share price/total IPO higher in relation to PE ratios. Mastercard sold theirs at 15 times earnings, Visa is looking to set their total IPO at about 22 times earnings. It likely won’t go up 500% in two years but at even half that I’d be a great return. There is a lot of buzz and volume is certain to be huge. They don’t get much more stable than Visa either.

I can’t see how this will lose. Anyone going to try to get into the IPO or buy day 1 at least?

Where are they at in terms of toppling the credit card duopoly?

You have to have money to make money on deals like this, and alas, I have none. I couldn’t even scrape together enough to buy 10 shares of Visa most likely, forget about 1000 or any number likely to make real money.

I’m always leery of sure things.

IPOs are, historically, not worth it.

Yeah that Google IPO sucked.

So did Mastercard’s.

Yes it has alot of factors in its favor, but I think that will put a premium on the price… If you have a 5+ year timeframe though I think its a great investment.

Yeah that Google IPO sucked.

So did Mastercard’s.

Exceptions that prove what?

Come on, that’s faulty logic and you know it. He was right about IPOs, based on past performance. Initial spikes (which you often will not get in on even if you want to, unless you are a huge institutional investor allocated a block of initial sale shares as a favor from an underwriter), typically followed by fairly rapid drops.

The fact that some are successes does not mean that it is a good or safe play as a general rule.

Isn’t it virutally impossible for individuals to get in at the ground floor price or anything reasonably close? Slyfrog touched on it in his post.

Etrade and Schwab both let you set your max price for IPOs. You can get in on the ground floor and buy as few shares as you want.

There are two components to IPO returns:

  1. Underpricing relative to market-clearing price.

  2. Longer term return (measured over weeks/months/years).

Re: 1
Many IPOs are priced at a bit of a discount (or sometimes a severe discount), to what they will reasonably be expected to trade at when open trading begins. If you are able to get an allocation of such an IPO, and you sell the stock nearly immediately when trading begins, you will very likely make a nice profit.

BUT, as you might imagine, it is, IIUC, rather difficult to get an allocation of stock with what amounts to a nearly guaranteed short term profit. You would quite possibly need an ‘in’ with a broker - perhaps a heavy volume that you do with them. Moreover, in some cases, IIUC, in order to get an allocation you may be required to commit to holding the stock for some period of time (days to months, I think), therefore, subjecting your position to risk.

Re: 2
IIRC, the studies I’ve read show that once you factor out that initial pop (which most small investors can’t obtain anyways), IPOs generally underperform the market. Of course, there are exceptions. And sometimes, when you buy a Lotto ticket, you win., but I don’t invest my portfolio in Lotto tickets.

Yes, it’s called “spinning.” It’s an interesting subject.

A lockup period. However, those are generally (I will not say always, but I have never seen the contrary) applicable only to people who owned stock prior to the IPO, whose shares are being made publicly tradeable. The lockup rights are given so that the underwriter can make the initial market, and not watch it be spooked by a massive dump of existing investors on day 1 looking to cash out. Usually a registration rights agreement with individual investors will state that the company (really its underwriters) will have the right to require the shareholder to not sell for 90 or 120 days after the initial IPO if it deems it reasonable or necessary to protect the IPO process.

But people who are actually allocated shares in the IPO process itself are not subjected to these restrictions that I have ever seen. It would be almost a mistake by definition - the whole point of the IPO is an initial offering of shares freely tradeable thereafter (because they are registered for resale). Saying that initial buyers in the IPO would have to wait around for 3 months would not make sense.

The financial markets and economy in general were doing a wee bit better in 2004 (Google) and 2006 (Mastercard) than they are now.

I’d seriously think about investing in this IPO with this current market. For a company that relies on very few banks for its business:

Also, Visa appears to be unusually dependant on less than handful of major banks for a good portion of its business. Last year, about 23% of its revenues, or $1.2 billion, came from their five largest customers. J.P. Morgan Chase alone accounted for 9%, or $454 million. The filing notes that “On short notice” these relationships can be terminated.

And with Bank Profits the lowest since 1991

U.S. bank and thrift earnings dropped to the lowest level since 1991 in the fourth quarter, hurt by trading losses and increased reserves for bad loans, the Federal Deposit Insurance Corp. said.
Profit for FDIC-insured institutions was $5.82 billion, an 83 percent decline from the $35.2 billion reported in the fourth quarter of 2006, the regulator said in its quarterly report on the banking industry.

Especially with Visa’s largest business partner, JP Morgan is one of the hardest hit:

Bernanke, during the second day of his semiannual testimony before a congressional committee, said there may be some failures among smaller banks that invested heavily in real estate because the housing market’s severe problems may drain their capital. He added, however, that the U.S. banking system overall is in good shape with the biggest banks well capitalized.
The KBW Bank Index (.BKX) was down 3.3 percent, while the Standard & Poor’s financials index (.GSPF) was down 3 percent. JPMorgan Chase & Co. (JPM.N) shares led the Dow’s biggest decliners and weighed heavily on the S&P 500. JPMorgan Chase slid 3.7 percent to $42.75 after two brokerages cut their earnings estimates.

(and with the consumer mortgate lawsuit allowed to proceed in Wisconsin)…

It’s dicey to think you’re going to get Mastercard/Google returns in this economic climate.

But I could be wrong here, and I’m not a corporate or securities attorney. The first article, after all, is very effusive about this IPO…

Duuuuuh, put it on your visa!

It’s been a while since I read this, and I may be remembering wrong, but I think I read that at the height of the tech boom, there would sometimes be restrictions attached to IPO shares allocated. This goes beyond restrictions on pre-IPO holders. I don’t recall the exact restrictions - possibly they didn’t cover the full allocation (perhaps only a fraction), and they may have been relatively short.

But the purpose, I’d imagine, would have been to cause a bigger initial pop in the price.

If the market was excited about a tech stock, there would be a pool of buyers who’d want to buy post-IPO. If the company and its underwriter could limit the amount of stock that was truly liquid upon IPO (by keeping most of the stock tied up), then there might be a lot of buyers chasing a small amount of liquid stock, causing a big pop.

I think VISA is a long-term good investment. America (and increasingly, the rest of the world) loves credit card. VISA gets their 2-3% with little risk from the banks.

I heard whispers that Bank of America was considering dropping VISA and creating their own competitor.

Those rumors died off shortly after they started, I think, in Summer’06.

Bank of America and Citigroup trade places as the top issuer, but I don’t think they have the volume to make the investment worthwhile. Visa and Mastercard (and to a lesser extent American Express, all of which process payments for BofA now) are too firmly engrained to allow for a new competitor. If BofA was seriously considering this, they probably changed their mind now that Discover’s share price is down nearly 50% from the IPO.

Well, to all you naysayers, I just sold VISA’s stock offering and made a 59% return on a month’s investment. Probably should have held it a bit longer but I risked a substantial amount based on what I thought of as a sure thing. Risk vs. reward. Woo hoo!