Reuters - Visa offering not seen as elixir for U.S. IPO market

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Visa offering not seen as elixir for U.S. IPO market

Sunday, Mar 23, 2008 2:37PM UTC

By Jui Chakravorty Das

NEW YORK (Reuters) - The blockbuster initial public offering of Visa Inc <V.N> -- the largest ever in the United States -- will do little to revive the slowing IPO market, which has been dampened by investors spooked by the credit crisis.

With its $17.9 billion offering, the world's largest credit-card network's IPO is the first bright spot in the U.S. IPO sector this year, but that market is likely to return to gloomy skies in the coming months.

"Visa is in a league of its own," Francis Gaskins, president of research firm IPOdesktop.com, said.

"For anyone else to make it in this market, you have to be profitable, you have to have a growth plan that doesn't require accessing the debt markets and your proceeds should not be used to pay off debt," Gaskins said.

"There are few, if any, companies like that in the pipeline."

Visa raised $17.9 billion in an offering late Tuesday as investors seized on its growth potential and lack of direct exposure to the global credit crisis. The San Francisco-based company sold 406 million shares for $44 each -- above the forecast range of $37 to $42.

Except for Visa, none of the U.S. offerings have priced above their range so far this year, compared with 16 deals that priced above range in the same time period last year, according to data tracker Dealogic.

More than 60 IPOs were withdrawn or postponed in the past two months, with at least 30 of those in the United States alone.

In another bleak statistic, the volume of IPOs so far in 2008 is about half what it was a year earlier, according to Dealogic.

"There just isn't an appetite for IPOs right now and Visa is definitely a stand-alone event," David Menlow, president of IPOfinancial.com said. "It will have no bearing on IPOs yet to come into the marketplace."

Case in point: While Visa launched its stronger-than-expected offering, CardioNet, a small health-care company, was also making its debut.

CardioNet, however, priced at $18, below the initial range of $20 to $22 apiece, and its shares fell subsequently.

Visa and rival MasterCard <MA.N> are seen as good bets to avoid the market turmoil as neither is directly exposed to rising defaults and late payments because they do not issue cards, unlike American Express <AXP.N>.

"There are no more credit-card companies like that which aren't public. This was the last of them," Menlow said.

In January and February, the global credit crisis forced IPO hopefuls to shelve offerings totaling $21.4 billion, almost double the value of new equity issuance, Thomson Financial Data showed.

Globally, 92 issuers raised just $12.2 billion in IPOs in the first two months, the lowest level since 1993.

"The IPO market is in a self-preservation mode right now. Underwriters are not interested in bringing IPOs to the marketplace that aren't reflecting the most current valuation consensus models," Sal Morreale, who tracks IPOs at Cantor Fitzgerald, said.

He also said he expects to see more planned IPOs withdrawn or postponed.

"Visa is a singular situation," Morreale said. "It's a short-term shot in the arm. It could get things rolling again, but if the general market environment remains choppy, it won't help in the long run."

(Editing by Maureen Bavdek)