While many financial Goliaths have been hit hard by the credit crunch and would be apprehensive about tapping public markets for capital given widespread concerns about bad debts below the waterline (should that be above the bottom line), Visa have announced they are launching the biggest ever IPO in US history at approx $18bn, with half of the company shares up for grabs.
Following in the footsteps of their rival Mastercard who IPO’d a couple of years ago and whose shares have rocketed since, they are in the fortunate position of being a processor of transactions rather than a lender and hence don’t carry the financial baggage of many institutions. Whilst some might argue it’s not an ideal time to be raising money because of weaker markets, the banks which own Visa will welcome the payday to prop up their own capital bases [cash counts 100% towards capital unlike investments in other companies]. JPMorgan Chase will receive approx $4bn, Bank of America $2bn and Citigroup $1bn.
Visa is not immune not financial downturns and ultimately its revenues are closely correlated to spending in the economy albeit, excluding Europe which will continue to operate as a separate business, it has geographically diverse exposure given it’s worldwide operations. The challenges it faces from online payment services such as Paypal and others as more retail commerce moves online cannot be ignored, albeit relatively minor at this point in time.