December 24, 2007

Visa IPO

Visa is set to become a public company in 2008. It is expected to be one of the biggest IPOs in recent years. Although I do not like IPOs or investing in them, Visa offers a strong business that is worth the look.

You can find Visa prospectus here.

Most credit card companies, the big three anyways: Visa, AMEX and Master Card, are great businesses to own. They are what some investors dub them "toll bridges"; you have to pay every time you use them and in this case the merchant as well as the user pay.

Credit card companies have an incredible competitive advantage to new comers, if any dares to compete, look at the financial shape of Discover cards. The industry is almost impenetrable. Visa is one of the strongest franchises in credit card processing industry. It has one of the largest networks for card processing, a valuable brand name, and a large installed base of retailers and merchants accepting its cards. Visa is the largest credit card company of the three. It processed more than 44 billion transactions last year worth more than $3 trillion.

The company, no doubt, have the all the ingredients to be a value idea but at what price. Certainly people will trip over themselves to buy Visa sending its shares into the stratosphere. I think it is prudent to be patient with this one and look for an opportunity , as no doubt there will be some. Visa is locked in some litigations that can offer such an opportunity depending on its outcome. Another opportunity is the slowing economy and a possible rescission, which can send credit card defaults higher, which in turn will reduce Visa's earnings.


shannon said...

we are truly and swiftly becoming a cashless society! more and more people are using their credit cards for everything, it is absolutely imperative that businesses accept credit cards. if they don't, how can they possibly survive?! credit cards are what's IN!

Sami said...


I find it is harder to pay in cash than to pay with a credit card.