Updated from 3:12 p.m. EDT
V is Victory -- or
Shares of the San Francisco-based credit card payments processor, trading under the "V" symbol on the
New York Stock Exchange, surged well into the double digits on its first day of trading Wednesday. The stock opened at $59.50 a share -- 35% above where shares were initially priced, according to
Bloomberg. Shares ranged from $55 to as high as $69 a share throughout the day. The stock closed at $56.50.
Nearly 177 million shares of Visa traded hands on Wednesday.
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"This is an exciting and historic day for Visa," said Visa's Chairman and CEO Joseph Saunders. "It marks the culmination of a more than two-year process that led to our global reorganization and our becoming a public company.
"We believe Visa's new structure positions us to meet the changing needs of our merchant and financial institution clients around the world as we seek to enhance and grow the products and services we provide to our customers," Saunders continued. "We operate in a large global market undergoing a significant shift from cash and check to electronic payments. We believe Visa is well positioned to build upon our past success and take advantage of this migration to electronic payments."
406 million of Class A shares at $44 a share, above the expected range of $37 to $42 a share. Visa expects net proceeds from the offering -- after deducting underwriting discounts and commissions and estimated offering expenses -- to be approximately $17.3 billion, it said on Wednesday.
Large IPOs typically don't spike in share price like Visa did on Wednesday, observers say. Investors may have taken a break from the dire news coming out of the financial sector to take advantage of the positive outlook for Visa. The company doesn't assume credit card loan risk onto its balance sheet, but instead makes money from transactions processed. Visa is also relatively shielded from a downturn in the U.S. economy. It has a large debit card network in which many purchases are "nondiscretionary," such as gas and groceries as well as other necessary items.
"The underwriters could have maybe sold it higher, but probably because of the weak market they erred on the side of caution and priced it to make sure that they're clients who got in on the IPO made money today," says Nicolas Einhorn, an analyst at Renaissance Capital, which runs the website IPOhome.com. "They could have sold it to clients at $60 but then it would have traded flat or down on the first day."
Many commercial banks will also receive a
windfall from the IPO
by selling their ownerships stakes in the company.
Others may have bought the stock after seeing
successful offering in 2006. MasterCard's stock rose 17% on its first day of trading from its offer price of $39 a share. The stock has risen more than 400% since then.
"It's certainly enough to take your breath away to see a stock price above the range in a market that is so schizophrenic
a deal of 406 million shares on top of that," says David Menlow, president of IPO Financial Network. "It's refreshing to see it, I don't fault anybody to say that they underpriced the offering, but the trap is people think this sounds the all clear for IPOs in general. This is a singular event that doesn't have very much bearing on the current state of the IPO market."