VISA SHARES jumped as much as 38 per cent as the world's largest credit card network made its market debut, with investors enticed by potential growth in cashless transactions handing some beleaguered US banks a much-needed payday.
More than half of the proceeds of Visa's record $17.9 billion initial public offering will go to JPMorgan Chase, Bank of America, National City, Citigroup and the other banks that are Visa shareholders.
The stock, sold in the IPO at $44, opened up 35 per cent and rose as high as $60.60 on the New York Stock Exchange. In afternoon trading, it was still up 33 per cent at $58.65 despite a slide in the broader stock market.
While the banks that issue credit cards are bracing for write-downs on bad debt amid a worsening recession, payment processors like Visa are seen as well-placed to benefit as more and more consumers use credit cards to pay for everything from a cup of coffee to a taxi.
"Visa enjoys one of the widest economic moats that a company can desire - a network that connects thousands of financial institutions," said Morningstar analyst Michael Kon. It would be very hard for a rival to duplicate that network, he said.
The Nilson Report, an industry newsletter, projects that by 2010, 70 per cent of all payments will be made with credit or debit cards.
The Visa IPO is the first bright spot this year for the US IPO sector, which has fallen into the doldrums as growing credit market woes have spooked investors. The volume of IPOs so far in 2008 is about half what it was a year earlier.
- (Reuters)
