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Bonds Are a 'Safe' Investment: A Big Lie Gets Even BiggerOne of the years most touted and anticipated IPOs is sure to be that of Visa. The credit card company has filed for the IPO and investors were eagerly awaiting the debut. That was until yesterday. News from American Express Co. (NYSE: AXP) that customers are having trouble paying back loans, and paying off monthly payments on their credit card debt, sent the stock down over 10%. MasterCard Inc. (NYSE: MA) stock dropped more than 8% on the bad news as well.
With the stock market taking it on the chin, and now this bit of bad news in their industry, will we see the planned offering delayed? I think there is a fair chance that there will be a delay. The IPO market usually takes time to recover from a market beating of this sort. Investors are usually a bit gun-shy to pull the trigger on some new hi-tech issue. Visa on the other hand is not going to be your typical IPO. The company is obviously going to have a market cap in the tens of billions of dollars, and institutions will want a piece of the company. Still, that being said, they will want to have the same type of IPO that MasterCard had last year, and I would expect the underwriters to hold this offering until we see some continued market strength.
Aaron Katsman is the lead Portfolio Manager and Managing Director of America Israel Investment Associates, LLC. and Senior Editor of IsraelNewsletter.com. DISCLOSURE: Writer has no positions in any stock mentioned as of 1/12/08
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Reader Comments (Page 1 of 1)
3-15-2008 @ 5:58PM
Heath Ewer said...
Any negative impact to Visa or Mastercard's stock as a result of AMEX announcing they are having difficulty in collecting payments from cardholders clearly shows that most people don't understand the difference in business models between companies like AMEX and companies like Visa and Mastercard.
Visa and Mastercard provide the service to connect the Issuing and Merchant Banks to enable the transfer of funds between institutions (e.g. authorization, clearing and settlement). The Issuing and Merchant Bank organizations plug into the Visa/Mastercard networks and pay a transaction fee when utilizing their network. Visa and Mastercard are not in the business of Issuing credit cards to card holders, thus they are not directly impacted by cutsomers that cannot pay their balance, and I would argue that they are ultimately not negatively impacted by slow downs in the market. Remember, they only provide the service to complete the authorization and transfer of funds. Ask yourself, do people tend to use their cards (debit, credit, pre-paid) more when they are doing well financially or when they are struggling? Although there may be differences in why one uses their card during differing financial times, the reality is you will use it during both times.
AMEX on the other hand ownes the relationship with the cardholder and has their own network to perform the authorization and transfer of funds from the AMEX Merchants to the AMEX, who issues cards to AMEX members. Thus a slow down in cardholder payments will impact AMEX as noted in the article, however, any impact to Visa / Mastercard stock prices would be due to the lack of understanding of the differing business models between companies like AMEX and companies like Visa / Mastercard.
1-13-2008 @ 11:23AM
Matt said...
Visa's IPO is only going to strengthen the competition between MasterCard and Visa and should help spur more advanced payment technologies in the near future. (IMO) I look for both Visa and MasterCard to have a strong 2008 overall.
1-15-2008 @ 9:16PM
Joshua Van Tilborg said...
Please someone out there please let me know what you know about Visa Inc IPO. No new news since Sept 2007. Someone has gotta know something. Price? How many avail? Date to be offered? Christ!!!