Visa Inc. IPO Valuation – $74 a share?

As Visa Inc. continues to prepare for its reported IPO possibly during the week of March 17 (according to Dow Jones), Morningstar suggests that the company’s real worth could be nearly double the amount they are planning to sell shares at.  Previously, according to Dow Jones, Morningstar’s estimate of Visa’s worth was $65 – and now, just one week later, it is $74.

What could cause these extra billions in perceived value?  One report explained that the reason is Visa’s brand name; Worldcom and Enron had strong brand names too.

What accounted for a $9 per share increase, especially at a time of market uncertainty, new legislation coming from Washington and a reminder that if the antitrust litigation is successful, it could cause the company to become insolvent?   Just yesterday, Legal Times pegged the potential legal liability at $50 billion. 

That’s Wall Street for you.  It seems to greatly be about perception.  What changed in just one week? 

Like several recent articles on Visa’s IPO, it omitted any mention of its potential liability from the merchant suits and a discussion of the recommendation about MasterCard’s IPO too.

We liked this assessment the best from Renaissance Capital: “Visa appears to be coming to market at a sizable discount to MasterCard based on (its) forward price-to-earnings ratio, which may be because the banks that are receiving most of the proceeds are strapped for cash and are pricing the deal to sell.”

Are the thousands of banks that own Visa simply being generous and sharing their wealth with investors?  When was the last time greed didn’t play a role in the valuation of an IPO?  Are the banks just being nice?  Why the run for the fire-sale exit?   Shouldn’t the banks secure the maximum payout possible for its shareholders?  Or, are the banks frightened and trying to push off their legal liability at any cost to rush this deal through? 

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