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San Francisco: The credit crisis that has been haunting the stock market for months wasn't enough to scare investors away from the initial public offering (IPO) of the world's largest credit-card processor.
Overcoming the jitters that have battered many of the lenders that issue its cards, Visa Inc. sold 406 million shares at $44 apiece late on Tuesday to raise nearly $18 billion and complete the most lucrative IPO in US history.
At the open of trade yesterday, shares soared nearly 48 per cent, or $21, to $65. "This shows that all the recent financial turmoil obviously hasn't bothered a lot of people," said Nicholas Einhorn, an IPO analyst for Renaissance Capital of Greenwich, Connecticut.
Investment bankers could still exercise an option to buy another 40.6 million Visa shares during the next 30 days. If that happens, Visa's IPO will end up raising $19.7 billion before expenses.
The company will make its debut with a market value of about $36 billion.
Based on the strong demand among money managers who wanted a piece of the IPO, Einhorn anticipates Visa shares will quickly soar above $50.
Safe haven
Visa has been touting its stock as a safe haven - a message that apparently resonated with investors.
"In times like this, you generally see a flight to quality," said Joel Greenberg, a New York attorney who has advised on other IPOs.
Unlike credit card lenders, Visa doesn't carry any consumer debt on its books. The company makes money from processing fees, which have been rising for years, including the past two US recessions in 1991 and 2001.
Visa could benefit from tougher times if more cash-strapped consumers rely on their credit cards to make ends meet, said Aite Group analyst Gwenn Bezard. "And even if people can't pay back the debt, Visa still makes money. It's a very attractive company."
More than $10 billion of the IPO proceeds are being used to buy back some of the shares owned by the banks that have helped build Visa during the past 50 years.
The IPO gives investors a chance to profit from the rise of electronic payments as more people eschew cash.
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