By Mike Caggeso
Visa Inc.'s (V) record-setting $17.86 billion initial public offering (IPO) last month provided a much-needed dose of good news to the economic mire we're in.
With main indices down significantly since Jan. 1, a slew of companies – including many financial firms – recently (and gladly) offered to share how much they pocketed from their stake in Visa's IPO:
- Bank of Hawaii Corp. (BOH) said its net income would jump by $7 million to $9 million in the first quarter, much of which will come from a mandatory redemption of its Visa stock, the Star Bulletin reported.
- National City Corp. (NCC) said it would post a $450 million cash gain from selling about one third of its stake in Visa, BusinessWeek reported.
- West Virginia's City Holding Co. (CHCO) from a partial redemption of its Visa holdings.
- Overseas, federally owned Banco de Brasil took in $207 million from selling a portion of its Visa stakes. Its private sector rival Banco Bradesco (BBD) made $201 million from Visa's IPO. Both figures are before tax, Business News Americas reported.
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- South African bank FirstRand said last week that it received a pre-tax gain of $123 million from its shareholding in Visa, iAfrica reported. Of that, $69 million was from the sale of its Visa's shares and $54 million is the value of the remaining shares. FirstRand is locked into holding those remaining shares for three years.
- Melbourne-based Australia and New Zealand Banking (ANZBY) reported that it expects to pocket $350 million pre-tax from 50% to 60% of its shares in Visa. Follow Aussie banks National Australia Bank and Westpac are expected to turn a $200 million and $100 million profit, respectively, The Age reported.
- And in China, China Life Insurance (LFC) sunk $300 million into Visa's IPO. Assuming it bought its shares at Visa's opening price of $44 a share, that investment is now worth more than $439.5 million at Friday's $64.46 closing price. Also, China Investment Corp. – the country's $200 billion sovereign wealth fund – made an undisclosed investment in Visa's IPO, .
"It's not standard practice to say it, but typically big institutions do if they are part of the IPO process and receive allocation," said Money Morning Investment Director Keith Fitz-Gerald.
Still a Buy?
, Visa's 406 million shares were originally priced at $44 each – well above the expected price range of $37 to $42 a share. The $17.86 billion proceeds it took in made it the biggest U.S. public offering, shattering the $10.6 billion AT&T Wireless raised in its April 2000 IPO.
Globally, only one deal was larger: The October 2006 IPO of the Industrial & Commercial Bank of China, or ICBC, which raised $19.1 billion – or nearly $22 billion when the over-allotment provisions were fulfilled.
However, $44 was the price underwriters and large-scale investors got in at.
Visa's shares opened at $59.50 on the New York Stock Exchange (NYX), and traded as high as $65, before closing at $56.50, up $12.50 a share, or 28.41%. The following day, shares jumped another 13.89%.
The initial run-up and continued growth gives the San Francisco-based Visa a market value of more than $52 billion.
And shareholders are still piling on – despite companies publicly declaring they are cashing out – because of Visa's dominant market position and the growing shift into electronic payments.
"Visa's CEO has got it together," Fitz-Gerald said. "He's targeting Chinese growth and that should go right to the bottom line."
As far investing in the company, Fitz-Gerald suggests buying in increments to capture safest gains.
"I wouldn't jump all in now, but there is long term value."
News and Related Story Links:
- Star Bulletin:
Bankoh gets boost from Visa IPO
National City sees gain with Visa sale
- Associated Press:
- Business News Americas:
BB receives US$207mn, Bradesco US$201mn before tax from Visa IPO
FirstRand benefits from Visa IPO
- Today's Financial News:
- Money Morning: