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Author: tedamerica Three stars, 500 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 58  
Subject: Buy or not to buy Date: 11/12/2007 2:20 PM
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Great new board.

Visa is scheduled to make its' IPO January of 2008 or thereabouts.

Whats the verdict? Visa is larger, more profitable and believed to be a part of the future as more and more people pay with CC instead of CC.

I guess the question is to bet the farm on the IPO?

Do you buy at all? Do you buy some, watch and wait? Watch and wait for a good opportunity? Dont buy at all?

Will the IPO be offered to Joe Regular Investor through Ameritrade, Scottrade, etc?

Anyone that has experience here know?

Ted
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Author: moneyonmind Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 4 of 58
Subject: Re: Buy or not to buy Date: 11/12/2007 2:27 PM
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To my untrained eye, thus far it sounds like they have not revealed whether or not shares will be available to John Q. Public.

Genevieve

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Author: PieInYourFace Three stars, 500 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 5 of 58
Subject: Re: Buy or not to buy Date: 11/12/2007 3:48 PM
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Even if no shares are offered to John Q., it is worth thinking about by analogy to what happened with MasterCard.

Mastercard's IPO was a big "meh". The stock didn't do too well at first, however, in the past year or so it seems to be going better and the stock price has I think doubled or more than that in the past year or so.

So even if one can't get in on the IPO, the idea would be to see what happens and perhaps buy into it afterwards. I'm not sure that buying on the day of the IPO is such a good idea for Joe Retail anyway, because oftentimes institutions and insiders see the IPO as a way to dump shares and cash in quickly.

I thought this would be a great topic for discussion and possible investment, in addition to the analogy with what happened in Mastercard, because this potentially has characteristics of 1) a Peter Lynch like investment (well known brand that everyone uses); 2) a possible Warren Buffett style investment (franchise, possible moat, possible high return on equity, possible high return on invested capital).

This will be a $10 billion IPO which apparently is pretty large for an IPO. You do have to wonder somewhat why they're choosing right now to dilute ownership. Maybe something to do with the credit market turmoil. Maybe now financing operations through equity is cheaper than doing so by taking on debt/more debt.

Of course I have no familiarity with the nuts and bolts of Visa's financials and possibly no one really does as it's privately held. However, I was hoping that someone might be able to compare Visa with perhaps some other consumer lending operation/bank/card issuer. Possibly Amex?

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Author: UMassHoops One star, 50 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 6 of 58
Subject: Re: Buy or not to buy Date: 11/13/2007 7:39 AM
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On the timing of the IPO, Visa has been preparing for this for a few years, it has nothing to do with the turmoil in the credit markets.

I have sold software to them for years and as a result get intimately familiar with their budgeting process. For the past couple years it's been all about cutting budgets, getting their house in order, etc. etc. in anticpation that they would be going public.

Unfortunately due to the success of Mastercard I have a feeling that the Visa IPO will be more enthusiastically received and price much higher as well than MA initially did. That is unfortunate because I would love to own a piece of this fantastic business.

Visa the organization going public is really the transaction processor (why they need all the software) and brand holder. They have member banks that issue the cards.

Several years ago when I sold to them I used to refer to Visa's IT organization as the "country club" because it seemed like the execs played a lot of golf and had bankers hours. The organization was bloated to say the least and you could always count on them spending a lot of money on projects, demo/lab equipment etc. far in excess of what most leaner public companies would buy. In short they had money coming out of their ears and their model was to bill member organizations, so it made little sense to curtail spending, they just eventually added it to the tab. So that is the good news, I still think there is a lot of efficiency and fat to cut out of Visa, but they have been on that track for a little while now.

It will be interesting to watch, any reasonable valuation and I will definitely open a position.

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Author: PieInYourFace Three stars, 500 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 7 of 58
Subject: Re: Buy or not to buy Date: 11/13/2007 8:49 AM
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Unfortunately due to the success of Mastercard I have a feeling that the Visa IPO will be more enthusiastically received and price much higher as well than MA initially did. That is unfortunate because I would love to own a piece of this fantastic business.


Thanks UMassHoops for this very informative post.

You already answered the key question, is it a good business? Apparently not just good, but "fantastic."

I am looking for a low hurdle to jump over. I'm not smart enough to catch a falling knife. :) So Visa makes it past the first cut.

Would you care to comment on how Visa could be evaluated, i.e., what its intrinsic value might be? I'm really very ignorant about how credit card processing companies make their money. What valuation metrics could be used?

Also, how do you see Visa stacking up, mid-to long term, versus say MC and Amex?

Curiously, I wanted to cross post a link to this new message board to the Amex board, as I figured there would people there who could jump on this analysis.

Guess what? As far as I can tell, there is no TMF Amex board.

Even if the price for Visa is too high to buy in at the IPO, if we can establish a rough idea of its value, perhaps an opportunity to buy in might arise afterwards.

What do you think?

Again thanks for your comments.

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Author: UMassHoops One star, 50 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 9 of 58
Subject: Re: Buy or not to buy Date: 11/14/2007 2:30 PM
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Hi, thanks for the compliment. I'll be the first to admit that I can be useful to provide some subjective insight into Visa, having worked with their business as one of their key IT vendors for the past 8 years, however when it comes to valuing Visa from a financial standpoint i.e. intrinsic value I would fall to the bottom of the heap. I don't even think there is enough public financial data out there yet to do that kind of analysis.

What I can say, building on my previous post i.e. the "country club" environment, I don't even mean that in a derogatory way. The Visa folks I work with are among the nicest I have ever encountered. What in part engendered that environment is lack of accountability for profits. No real pressure. Not only is Visa not public but they are actually more of a "not for profit" in the sense that the member banks own and fund Visa, and the actually business of Visa is to provide transaction processing (i.e. everytime the card is swiped), fraud detection, and marketing services for the Visa brand.

However I see a sea change at Visa as they go from a "not for profit" environment to a "pre IPO for profit" public company. They are tightening up budgets, consolidating vendors, thinning out management ranks etc. and in general preparing themselves to be lean and mean vs. AXP and Mastercard. Can the culture do it, I think so, they are in the heart of the Bay Area and everybody likes to get rich including the Visa employees. This IPO may just shore up housing prices around San Mateo.

Visa is by far the big daddy brand leader in terms of number of cards issued and number of transactions handled daily. AMEX definitely has a much better developed business offering, but with the consumer Visa is king.

I will try to dig around a bit on one question I have in how they are dealing with the member banks/branding issues as they go public and become more independent. There has always been a bit of a problem with member banks wanting to promote their own brands at least on an equal basis as the Visa brand. i.e. you see the Chase Visa or the Citi Visa. I think the brand is the biggest attraction here so hopefully that doesn't get diluted and it remains Visa first and foremost.

So great business hurdle, no question about it. Value? Wait and see as the IPO documents start to surface.

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Author: rbstad3 Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 21 of 58
Subject: Re: Buy or not to buy Date: 12/20/2007 8:21 PM
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"Will the IPO be" offered to Joe Regular Investor through Ameritrade, Scottrade, etc?


No shot.

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Author: tedamerica Three stars, 500 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 22 of 58
Subject: Re: Buy or not to buy Date: 1/3/2008 4:03 PM
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I spoke to my broker at Scottrade and he explained that we will be able to buy it the "day of" the IPO. He also explained that it must be a broker assisted trade. "Day of" is good enough for me.

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Author: Goodymanjl Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 23 of 58
Subject: Re: Buy or not to buy Date: 1/4/2008 3:37 AM
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Anyone have any indication (or idea) of when Visa will start trading?

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Author: TMFMrCHW Big gold star, 5000 posts Old School Fool CAPS All Star Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 24 of 58
Subject: Re: Buy or not to buy Date: 1/8/2008 5:40 PM
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Rumor I heard is early February... I haven't seen and definite details, their most recent filing is dated 12/21 and doesn't have any dates filled in yet.

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Author: Gahread Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 25 of 58
Subject: Re: Buy or not to buy Date: 2/25/2008 8:41 AM
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I'm a relative newbie to investing, so maybe I'm doing this wrong. Looking at the financial statement Visa released, they have post-tax income of $424M on revenues of $1,488M. Revenue growth from Q4 06 to Q4 07 was 26.9%. Income growth over the same period was... erk. 70.3%?!

It looks like they managed to hold expenses to a near standstill while growing their income. I don't know how long they can continue that, but I like what I see!

What worries the heck out of me is that third column in the financial report. They had to settle a lawsuit with American Express for $1.9 Billion-with-a-B dollars in 2007. There's another one pending for Discover right now. Visa stands a good chance of getting absolutely hammered in 2008 and/or 2009 if Discover's lawsuit goes through.

Long-term the prospect is a a lot better. Mastercard's Q4 2007 revenue was $1,073M with post-tax earnings of $304M. That tells me that Visa might have a little more fat to cut, but they're not going to be able to go too much further. Revenue growth was similar to Visa. From 2000-2006, Visa's total transactions grew by 14% a year. Estimate for 2006-2012 is 11% yearly growth. Respectable, but not jaw-dropping. Figure in inflation-adjusted fee increases and cost-trimming, and I can see income rising *at a VERY off the cuff estimate* by 13-16% per year.

Here's where I start to get really fuzzy: Based on the sizes of the two companies, Visa's market cap should be in the range of $37.5B, *assuming Mastercard is fairly valued*. If the IPO is for $42 a share, it will have an initial market cap of $17B. Actual value of a share should be about $92. That depends entirely on whether or not Mastercard's current share price is a realistic reflection of how much the company is worth.

Visa will probably not be hitting the $200 range of Mastercard simply because they're selling 406 million shares as opposed to Mastercard's 131 million. That's a serious dilution of value.

My take is twofold: First, I need to do a LOT of studying of Mastercard's intrinsic value since Visa's business model and efficiency seems to be a direct parallel. Take that, use an appropriate multiplier for the difference in the size of the businesses, and you get Visa's actual price.

Second, whether it's worth buying or not right off the IPO depends on how this Discover lawsuit works out, and how much the stock pops between the IPO and when it's publicly available. Given a $92 estimated value and some very significant risk of taking a $2B hit sometime in 2008-2009, I'm not sure what price I'd be willing to pay.

As a short-term play, I do not like Visa. Not one bit. It could very easily pop to $100 or more, followed by serious dumping as a massive loss is realized in 2008. Ride that wave and I can see a 50% loss happening too easily.

As a long-term play, I'm going to try for a good stake. I'm not sure what the right price would be. Anything over $90 isn't going to happen. Under $45 and I'll bury all my liquid assets there.

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Author: Buckaneer Two stars, 250 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 52 of 58
Subject: Re: Buy or not to buy Date: 3/18/2008 8:45 PM
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but if it opens at 60, would you buy it right away.... if you think it could go to 100... then sell as a trade.

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