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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.
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