Visa shares up 28% on day after record IPO

SAN FRANCISCO - Catapulted by the biggest IPO in U.S. history, Visa Inc. shares soared 28 percent in their debut on the stock market yesterday as investors bet that an accelerating shift to electronic payments would enrich the world's largest processor of credit and debit cards.

After being priced above expectations at $44 a share in an initial public offering that raised nearly $18 billion, Visa shares closed at $56.50 on the New York Stock Exchange yesterday. The gain gives the San Francisco company a market value of about $45 billion.

Investors say they believe Visa is in a lucrative position as more people rely on its electronic network to make payments instead of using cash and checks.

Visa generated $5.2 billion in annual revenue last year as it handled more than 44 billion transactions totaling more than $3.2 trillion. The volume put Visa far ahead of its main rival, MasterCard Inc.

Visa also is well-insulated from the credit problems that have scarred many of the lenders that issue the cards bearing its brand.

Unlike those lenders, Visa does not carry any consumer debt on its books. It depends on transaction fees, which have been steadily rising for years, including during the last two U.S. recessions in 1991 and 2001.

Since the last recession, Visa has enticed consumers to use its credit and debit cards more often to pay for staples such as groceries, gas and utility bills. Visa estimates that about 42 percent of its transactions fall into this "nondiscretionary" category, up from 27 percent in 2000.

"Visa enjoys one of the widest economic moats that a company can desire," Morningstar Inc. analyst Michael Kon wrote in a research note yesterday.

Visa overcame turbulent market conditions to surpass the previous U.S. record IPO of $10.6 billion, raised by AT&T Wireless eight years ago.

"To sell 400 million shares at a time like this is herculean," said David Menlow, president of IPOfinancial. com.