Visa's record IPO jumps 35%

"Shares of Visa Inc. leaped more than 35% in their market debut Wednesday, opening at $59.50 as investor demand for the largest initial public offering in U.S. history drew spirited bidding. It took about 45 minutes to align buyers and sellers before the share finally opened Wednesday, as demand surged amid renewed interest this week in financial shares."

Late Tuesday, Visa priced the hotly anticipated offering of 406 million shares at $44 each, pegging total proceeds at about $17.86 billion.

The pricing topped the previously estimated range of $37 to $42 a share. San Francisco-based Visa's shares will trade on the New York Stock Exchange.

"Despite the broad market malaise in 2008, especially in financials, the Visa deal was a triumph not only for the investors but for the underwriters who had to put together, in an artful way, the biggest IPO in U.S. history. I see a strong future for Visa," said Scott Sweet, senior managing partner at IPO Boutique.

J.P. Morgan and Goldman Sachs are lead underwriters for the IPO, which easily beat out the previous U.S. record held by AT&T Wireless. Back in 2000, AT&T Wireless priced at $11 billion. The strong demand for Visa's shares had been widely anticipated, as investors seize on a growth opportunity amid a harsh economic climate that has negatively affected the financial sector. J.P. Morgan was slated to offer nearly 29 million shares as Visa's largest selling shareholder, according to regulatory filings. After the shares priced above the expected range, that sale amounts to roughly $1.28 billion.

Investors have shown a great deal of interest in a Visa IPO due to the strong performance of card rival MasterCard Inc. since its own IPO in 2006. MasterCard shares have risen roughly 350% since then.

With jitters lingering in the markets about banks' balance sheets and capital requirements, financial-sector investors are pleased to have a reason for fresh enthusiasm. Ranking behind J.P. Morgan, Bank of America, which said its share of IPO proceeds is likely to amount to more that $400 million.

All told, the banking owners of Visa plan to use $10.2 billion to redeem 123.2 million shares of Class B common stock and 143 million shares of Class C common stock, according the prospectus.
About $3 billion of the proceeds will be placed into an escrow account for litigation settlements in legal battles with Discover Financial Services, among others, as well an antitrust suit.

The rest of the IPO pot, representing about $3 billion, is being reserved for general corporate purposes, which may include about $2 billion to redeem two more classes of stock in October. End of

Story by John Letzing, a MarketWatch reporter based in San Francisco.