U.S. equity managers view Visa Inc.'s initial public offering as a chance to grab a stock in the financial sector that is not weighed down by the credit crunch.
San Francisco-based Visa generates its profits from transactional fees, not by issuing credit, and transactional fees hold up in even the slowest economies as more consumers make purchases us-ing their debit and credit cards, invest-ors said.
“You have a massive move right now from paper money to plastic and electronic money,” said David Siino, a director and analyst for U.S. equity at Epoch Investment Partners Inc., New York. “Visa and MasterCard own a bridge, and any time you cross the bridge, you pay them the toll.”
Visa's stock is scheduled to go public March 19, with 406 million shares selling at an estimated share price of between $37 and $42. Underwriters may purchase another 40.6 million shares, according to the company's S-1 filing, putting a total value on the offering near $19 billion, making it the largest IPO in U.S. history.
Portfolio managers are still researching the company and haven't made final decisions on how much Visa stock to request, but analysts said they like the company's growth potential abroad and its ability to hold up in a weak market.
“What's most exciting is the international opportunity,” said David Honold, a security analyst/ portfolio manager with Turner Investment Partners Inc., Berwyn, Pa.
Emerging countries that have faster economic growth rates than the U.S. or Europe will give Visa higher transaction rates and higher adoption rates of new credit and debit cards, Mr. Honold said.
For the 12 months ended June 30, Visa processed payments totaling $1.83 trillion in the U.S., up 10% from the prior year. But in the rest of the world, Visa processed payments totaling $1.65 trillion, up 24% from the prior 12 months.