NEW YORK - Stocks are shaky, credit is tight, the economy may be tipping into a recession. Not the best of times to be going to the markets for what could be the largest initial public offering in US history.
That's the gamble Visa is taking as it gave details yesterday about an IPO that could raise up to nearly $19 billion: If it works, it could be an encouraging sign to the stock markets and may even help loosen the credit knot.
While Visa's IPO will have little direct effect on its cardholders, the banks that issue Visa cards are expected to see a total windfall of more than $10 billion - which might keep them from pulling back credit lines further and pushing rates higher.
"That's a good thing for the banks, and a good thing for consumers. It might help ease the credit crisis a bit," said Ben Woolsey, marketing director at the card information website CreditCards.com.
Banks have suffered huge losses tied to defaults on subprime housing loans and are gearing up for more as consumer credit deteriorates. JPMorgan Chase & Co. - which has a 23 percent stake in Visa - stands to gain the most. The more cash-strapped Citigroup Inc. and Bank of America Corp. are also Visa stockholders.
Visa said yesterday in a Securities and Exchange Commission filing that it will offer 406 million shares at $37 to $42 each, following its rival MasterCard in shifting from being a privately held interest to a publicly traded company. If there is enough demand for Visa stock, underwriters will have the option to buy an additional 40.6 million shares.
The San Francisco-based company would not say exactly when it planned to float its shares, but IPO research firm Renaissance Capital said it believes the offering will price on March 19 to begin trading March 20.
Demand for IPOs has been incredibly weak recently.
Last year at this time, IPO returns were outperforming the broader stock market, and now, they're underperforming. The number of companies going public has dwindled to 18 so far this year from 34 at the same time in 2007, according to Renaissance Capital.
Visa expects to see high demand for its stock despite the housing-led credit squeeze that is threatening consumers' spending and their ability to keep up with debt payments.
Like MasterCard Inc., Visa is a card processor - not a lender - so it makes its money through fees from the banks issuing its cards and the merchants accepting them. And like MasterCard, Visa could see more struggling consumers increasingly use their cards for such high-cost necessities as healthcare, food, and gasoline, which could boost the fees Visa earns.
MasterCard raised $2.39 billion in its IPO nearly two years ago. Its shares have risen fivefold since then and are trading at more than $200 each, but have fallen more than 5.5 percent since the beginning of the month.