Message Font: Serif | Sans-Serif
 
UnThreaded | Threaded | Whole Thread (1) | Ignore Thread Prev | Next
Author: MoneyfanInOK Three stars, 500 posts Old School Fool Global Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 58  
Subject: MSN Money Article re: VISA IPO Date: 3/5/2008 10:05 AM
Post New | Post Reply | Reply Later | Create Poll Report this Post | Recommend it!
Recommendations: 1
Here are some highlights:

Visa could hardly have picked a worse time. The major indexes are off nearly 10% in 2008, and IPOs have fared worse -- down 18%, according to Renaissance Capital, a Greenwich, Conn., firm that specializes in IPOs.

And Visa is trying to sell nearly a half-million shares, raising $17 billion to $18 billion,so shares will need to be priced to move. "I think there will be an effort made to make sure investors get a price they feel comfortable with," says Kathy Smith of Renaissance Capital.


Don't buy the Visa IPO expecting the same huge gains that early buyers of MasterCard got. MasterCard was mispriced when it came out because of uncertainty at the time about the ability of investors to accept and put a price on legal risks related to several outstanding lawsuits.

Visa faces similar lawsuits, and that will be one of the risks. Visa is being sued by merchants who think the way it sets fees violates antitrust laws. It's also being sued by competitors such as Discover for blocking banks that issue Visa from offering competing cards. Last year, Visa paid $2.25 billion to American Express to be dropped from one suit.

The risk of having to pay out huge amounts is so high that analysts like Tom Taulli of DealProfiles advise avoiding the Visa IPO altogether.

But Visa will set aside $3 billion of the money raised in the IPO to cover possible damages -- which may be enough to cover losses from these lawsuits.

So what's a share of Visa really worth? Let's run the numbers.

Assuming Visa enters the market at the top of its $37-to-$42 pricing range, the stock would trade for just 19 times the upper end of the $1.80-to-$2.20 earnings per share projected by Nick Einhorn, a research analyst with Renaissance Capital.

MasterCard currently trades for 25 times 2008 projected earnings of $7.50 a share. So if Visa's earnings really do advance 20% to, say, $2.40 to $2.50 a share in 2009, and assuming it closes the valuation gap with MasterCard, it could easily trade for more than $60 in a year or two.

http://articles.moneycentral.msn.com/Investing/CompanyFocus/WhyVisasIPOShouldChargeYouUp.aspx
Post New | Post Reply | Reply Later | Create Poll Report this Post | Recommend it!
Print the post  
UnThreaded | Threaded | Whole Thread (1) | Ignore Thread Prev | Next

Announcements

Pencils of Promise - Back to School Drive
"Pencils of Promise works with communities across the globe to build schools and create programs that provide education opportunities for children."
Post of the Day:
Value Hounds

Considerable Headwinds for Profire Energy?
What was Your Dumbest Investment?
Share it with us -- and learn from others' stories of flubs.
When Life Gives You Lemons
We all have had hardships and made poor decisions. The important thing is how we respond and grow. Read the story of a Fool who started from nothing, and looks to gain everything.
Community Home
Speak Your Mind, Start Your Blog, Rate Your Stocks

Community Team Fools - who are those TMF's?
Contact Us
Contact Customer Service and other Fool departments here.
Work for Fools?
Winner of the Washingtonian great places to work, and "#1 Media Company to Work For" (BusinessInsider 2011)! Have access to all of TMF's online and email products for FREE, and be paid for your contributions to TMF! Click the link and start your Fool career.
Advertisement