Anticipating the VISA IPO

VISA, the largest U.S. credit card network said it is looking to raise $1o billion in an initial public offering, according to a registration statement with the SEC.

They plan to take a portion of the IPO proceeds to pay settlements or judgments related to litigation settlements. For example, VISA agreed to pay American Express up to $2.07 billion to settle a lawsuit alleging the company illegally stifled competition.

I am excited for the VISA IPO along with many investors after the success of Mastercard (MA). I entered Mastercard after its first major run but still managed to make a handsome profit with my buy above $107. The stock currently trades at $186.77 and recently broke out a cup with handle base above the pivot point of $169.26.

Why do I like VISA’s potential?

• $1o Billion would represent the second largest IPO ever!
• Revenues are expected to grow steadily as consumers continue to use their cards
• VISA processed 44 billion transactions totaling $3.2 trillion in 2006 (Mastercard processed 23.4 billion transactions totaling $1.9 trillion)
• VISA has made $771 million on $3.7 billion in revenue during the first nine months of 2007
• VISA makes their money from the fees it charges to card users and merchants using its network
• Mastercard is half the size of VISA and is up 5-fold from its IPO

BEST OF ALL:

• Because it acts as an intermediary, Visa doesn’t sustain losses when consumers don’t repay the debts run up on credit cards bearing its brand. Those liabilities instead fall to the banks that issue the cards and set the terms of repayment
• Most of Visa’s major stockholders are banks. They include: J.P. Morgan Chase & Co., which owns 23.3 percent of the company’s Class B Stock; Bank of America Corp., 11.5 percent; National City Corp., 8 percent; Citigroup Inc., 5.5 percent; U.S. Bancorp, 5.1 percent; and Wells Fargo & Co., 5.1 percent.

NO RISK for VISA; the banks are responsible for the cardholders that don’t pay their bills. What could be better than that? Tell me!