Visa's $17.9B IPO sets a record on a bad day for stocks

ByABC News
March 20, 2008, 12:08 AM

— -- Huge demand for Visa's record-setting IPO sent the shares surging Wednesday even as the broader market choked on credit fears again.

The success of the largest U.S. IPO in history and the strong interest from both professional and individual investors turned Visa into a bright spot in an otherwise choppy stock market. The Standard & Poor's 500 index fell 32 points, or 2.4%, to 1298.

Observers were ready for a strong debut, given the buildup in enthusiasm since last year. "I wasn't surprised to see that level of interest," says James Owers, professor of finance at Georgia State University. "This is a marquee IPO." Visa's strong showing was encouraging in that it was:

Good news for financial companies. After the implosion of Bear Stearns, top U.S. banks needed something positive.

Together, they made nearly $2 billion after the IPO was priced at $44 a share late Tuesday, above the expected initial range of $37 to $42. All the bank owners will collect about $10 billion immediately, says Michael Kon of Morningstar.

But the news could have been better for the banks, points out Jay Ritter, professor of finance at the University of Florida. Shares of Visa gained so much their first day that the sellers missed out on a historic amount of money.

By selling shares for $44 that were worth $56.50, the sellers left a record $5.1 billion on the table, he says. The second most left on the table was the UPS offering in 1999, which left $1.6 billion, he says.