Is VISA a Buy Now?

Yesterday was the highly anticipated initial public offering (ipo) of Visa – stock symbol “V” (you know you are big when you get a single letter) which ended up being the biggest stock IPO in American history. The stock was sold to (already) rich insiders, ie brokers,executives and various other people much richer than I, at a price of $44 per share.

As is often the case with “hot stock ipos”, the price started trading much higher (around $65) than the initial offering price and ended up the day at $56.50. So the huge financial gap between those rich insiders and myself, is ever so slightly larger as I write this.

The success of the VISA ipo is all the more surprising considering the fact that not once did I use my VISA card yesterday, so I’m guessing someone else perhaps took up the slack? 🙂

Is VISA a good buy now?

Hmmmm…..I have no idea. As I mentioned a couple of days ago I think that the amount of hype around this stock makes it a long shot to make money from trading in VISA shares but what do I know?? Well, I do know that if it was a good buy at the ipo price $44 (which apparently it was), it’s a lot less of a good buy at $56 which is quite a bit higher.

Who made money on the VISA ipo?

Not me (thanks for asking), but judging from the fact that 177 million shares were traded today out of a total float of 406 million – I would guess that a lot of the fat cat insiders who were able to order some ipo shares made out like bandits. Too bad the VISA investment bankers were not inspired by the Google Dutch auction system.

Anyone else?

From my extensive research it appears that the following institutions also made out like bandits in this deal:

  • Bank of America (BAC) – $625 million.
  • J.P. Morgan and Goldman Sachs – $500 million in fees.
  • Citygroup Inc. – $300 million.
  • Quest For Four Pillars Inc. -$0.00


The rich got richer, I’m still going to work tomorrow and VISA will probably do ok, but don’t expect the kind of returns that MasterCard has produced.


Visa IPO – The Good and the Bad

With the upcoming VISA ipo (initial public offering) I thought it would be worthwhile to write about this event. I’m not really a stock trading kind of guy since I’m generally more comfortable with exchange traded funds, however I like to follow stocks for interest (and the occasional purchase.)

What’s the big deal with the VISA ipo?

This will be the biggest IPO in US history at around 17 billion dollars. In comparison the much heralded Google IPO was about $1.7 billion dollars which was one of the biggest technology IPOs ever.

What exactly do they do again?

They are in a great business where they get paid for processing transactions for banks that have credit cards. Visa does about two thirds of all such transactions in America. A good chunk of the money will go to the member banks which currently own VISA – given how most of them have been hit hard by the credit crunch, the money will come in handy!

Should I buy the VISA ipo?

The problem with this stock is lots of investors get excited about buying stocks in companies that they are familiar with. Here in Canada we had an IPO a few years ago for a company called Tim Horton’s Donuts (THI) which is our best known coffee shop. This ipo had a lot of buzz around it but the stock hasn’t done all well since the financial performance of a stock has very little to do with the public’s sentiment toward the company.

Another easy comparison is Mastercard which has gone up about 400% in the two years since its IPO. As ThickenMyWallet points out, there are significant differences between the two companies such as the market share. Visa already has a good majority of the market so it will be hard for them to improve on that.

Don’t forget – IPO prices are based on supply and demand – if there is enough buzz around the stock then the IPO price will go up and it will be harder to make money from it. This buzz will frequently cause the stock price to rise a lot in the beginning which is when the average investor can buy it so it’s often a classic case of buying high.

On the other hand – investors who bought shares of Google (Goog) have done quite well until recently.

Another post on the Visa ipo.
A good post on the Tim Horton’s mania.