VISA Inc., the world’s largest credit and debit card transaction processing company, launched an initial public offering (IPO) today with a remarkable 57% rise in its initial price offering by noon. The company had been talking about its IPO for some time, and is now finding that the offering is being particularly well received considering the current US and global economic cycle.
In many respects, the IPO was payback time for the banks that supported the company over the last 50 years. These banks – Chase, Bank of America, National City, and CitiGroup – will benefit greatly in a time when writedowns from lending practices have hampered their balance sheets. Goldman Sachs and J.P. Morgan should also find a nice boost from the IPO as legal fees are predicted to top out at approximately $500 million.
The company doesn’t expect to see the sort of hyper-growth that its distant competitor, MasterCard, saw after its IPO, but rather a solid 20% growth over the next two years. Past VISA’s desire to trim approximately $300 million in expenses after the merger, its future appears to be as a stable prominent blue chip. It does not have any exposure to the current financial morass that other transaction companies, like American Express, currently have, and sees only positive results from legal issues that always seem to be floating about given its nature.
In many respects, the company will stand to gain from the general economic conditions of the times, even if they do not improve. If people start relying on their credit cards to get through slower economic times, the company will benefit through transaction fees without worrying about whether the bill is paid or not. Additionally, though cash may not be dead as far as younger users are concerned, it is definitely not the leading form of purchasing power they prefer in today’s electronic age. Further, non-discretionary spending in this regard is expected to grow from 43% to 55% in the next few years, making transaction velocity move higher without effort. For the most part, the company appears to have everything under control and is ready for a very profitable ride regardless of conditions, legal concerns or gloom of night.
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