Which credit card company holds the honor of most profitable IPO?

By Andrew Beattie AAA
A:

News of Visa's plans to go public created a buzz around Wall Street as soon as the papers were filed. The credit card giant cleaned out its closets - settling lawsuits and straightening out its accounting - in hopes of having the best IPO possible. MasterCard previously had raised $2.4 billion in 2006, establishing a record for credit card company IPOs. The question wasn't whether or not Visa would better the mark, but by how much.

ipo.jpg
Watch: Initial Public Offering (IPO)

The consensus was that Visa would set a new IPO record, erasing the $10.6 billion raised when AT&T spun out its wireless division as a separate company. Some people even held that Visa was placed ideally to double the mark. After all, credit card use was still growing internationally, usury laws in the states were circumvented, and recent changes to the bankruptcy act removed a good portion of default risk from the books of credit card companies.

Although Visa failed to double the record, it certainly did not disappoint. On March 18, 2008, Visa's IPO came in at $17.9 billion dollars. For the individual investor, the IPO was nice to look at, but nothing to participate in. A large chunk of the wealth ended up in the pockets of issuing banks like JPMorgan Chase, Citigroup and others in the underwriting syndicate. The underwriting syndicate collected around half a billion dollars in fees and also held onto large blocks of shares for their portfolios. Next came the institutional buyers and funds, buying up nearly everything the banks offered up. Basically, the only way to get a chunk of Visa's IPO was to be invested in a fund that bought in.

Investors will have their chance as the stock trades on the open market, going up and down as Visa tries to fulfill the expectations that come with a $17.9 billion dollar IPO.

For more on this topic read, IPO Basics: Introduction.

This question was answered by Andrew Beattie.

RELATED FAQS

  1. In an IPO, who is a greensheet distributed to and for what purpose?

    One of the most talked about documents that arises in the process of introducing a new issue is the greensheet. This is an ...
  2. Why do share prices fall after a company has a secondary offering?

    The best way to answer this question is to provide a simple illustration of what happens when a company increases the number ...
  3. What is a company's worth, and who determines its stock price?

    A company's worth - its total value - is its market capitalization, and it is represented by the company's stock price. Market ...
  4. What were the "browser wars"?

    When Netscape had its public offering on August 10, 1995, a last minute decision prompted the company to raise the offering ...
RELATED TERMS
  1. Credit Card Authorized User

    Definition of an authorized user of a credit card.
  2. EMV

    A standard relating to integrated circuit cards, point-of-sale ...
  3. Integrated Circuit Card

    A card that has an embedded circuit, such as a computer chip. ...
  4. Gray Charges

    Fees consumers pay via credit card or debit card for unwanted ...
  5. Credit Card Teaser Rate

    A lower-than-normal interest rate that a credit card company ...
  6. Debt Consolidation

    The act of combining several loans or liabilities into one loan. ...
comments powered by Disqus
Related Articles
  1. Comparing Credit Card Companies
    Credit & Loans

    Comparing Credit Card Companies

  2. Alibaba's Goal: Supplant eBay, Amazon ...
    Stock Analysis

    Alibaba's Goal: Supplant eBay, Amazon ...

  3. Credit Card Or Cash?
    Credit & Loans

    Credit Card Or Cash?

  4. Credit Card Arbitrage: Free Money Or ...
    Credit & Loans

    Credit Card Arbitrage: Free Money Or ...

  5. You Can't Live On Love
    Budgeting

    You Can't Live On Love

Trading Center