Visa Aims for Biggest Ever IPO
ALISON STEWART, host:
Visa, Visa, Visa. All right, not quite "The Brady Bunch," but Visa plans to generate as much as $18.8 billion when it goes ahead with an initial public offering, an IPO, of nearly half its stock. This would make it the country's biggest IPO to date. Didn't know that little, unassuming, three-by-two pieces of plastic in your pocket could have so much power.
So Wall Street is all atwitter with the news, but how about you on Main Street? Does anyone outside the money bubble care about this IPO? Anybody?
(Soundbite of song, "The Baby Elephant Walk")
STEWART: Well, we weren't exactly sure why we should care, why taking this Visa IPO. We're going to take it and run it through the Make Me Care challenge. This is when we challenge an expert on a certain topic to help us become invested in said topic. Here to make me care and take the challenge is Robin Sidel, banking and credit-card reporter for the Wall Street Journal. Hi, how are you?
Ms. ROBIN SIDEL (Banking and Credit-card Reporter, Wall Street Journal): Hi, good morning.
STEWART: I almost moved you to the Washington Post there. Sorry about that.
Ms. SIDEL: Yeah, I'd rather stay in New York.
(Soundbite of laughter)
STEWART: Okay. Stay on Wall Street, seeing as you are an economic reporter. I do want to set a base sort of understanding of Visa before we get to the make me care part.
Ms. SIDEL: Sure.
STEWART: Will you break down how Visa makes its money? The company name is on the credit cards, but they really aren't the ones extending the line of credit. So how do they profit? Why are they in the middle of this?
Ms. SIDEL: Right. Most people don't realize that Visa has pretty much no relationship with the consumer other than the brand on your card. Visa is basically a processing company. They own this network that makes money every time you swipe your card. They don't set interest rates. They don't slap you with those nasty late fees when you're a day late with your bill, but they make their money each time you use your card.
STEWART: Okay, so we understand that. Now, Robin, this across on the wires yesterday. It shot up to number three on Google most-searched, this Visa IPO. I'm not really sure why I should care, so what we're going to do is set a minute on our Make Me Care clock. I think you know how the game is played, but let me explain it for people who are listening for the first time.
Robin has one minute to make her case on why you and I should care about this Visa IPO. Robin, when you hear the ticking and the bell, your time is up. So this Visa IPO, initial public offering, Robin Sidel of the Wall Street Journal, make me care.
Ms. SIDEL: Okay. Well, as of when they actually go public, who knows if you're going to care, unless you're one of the lucky people who potentially get shares in the offering. But I think the real issue is down the road. Visa is a technology company, and they're looking at all different ways to gather information and provide offers for your credit card that are more appealing to you. They bring data together, and they work with merchants and banks to target their customers.
And the other thing is that they're looking for different ways to create different ways to pay. Particularly, there's a lot of emphasis right now on the cell phone and using your cell phone as a payment device, and that's something that people are pretty optimistic about in the future and can really change life as we know it.
There are all kinds of trials going on where you can download information at a sports team, and if you're at a game and download the score and download information on the players and then pay…
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STEWART: All right. So there are three main points in there, Robin Sidel. You said that for me, I can pay my Visa with my cell phone? This is - this IPO might result in that?
Ms. SIDEL: Sure. Well, it's certainly going to provide them with more money to make advancements in technology. So down the road, sure.
STEWART: So that's why Visa's doing this? They want the money to fund their future?
Ms. SIDEL: Sure.
STEWART: And what kind of situation were they in that they didn't have the money to fund their future?
Ms. SIDEL: Well, they were owned by banks. They were owned by thousands and thousands of banks, and they essentially operated as a cooperative, and now the banks are selling more than slightly over half of the company, and so as they become a public company, and they do well or don't do well, there's going to be more money in their coffers to do all these things for the future.
STEWART: But the demand for IPOs, from what I understand, has been kind of weak recently.
Ms. SIDEL: Sure.
STEWART: They're under-performing in the broader picture in the stock market. So why is Visa going ahead with this now? Why are they confident, when everybody else is bracing for the recession?
Ms. SIDEL: It's really about scarcity value. MasterCard went public in May, 2006, and people - MasterCard actually had to cut the price at which it was offering its stock, and it went public at 39. It's now trading at about 200.
Ms. SIDEL: So Visa thinks there's an awful lot of demand, and more and more people are using cards for everyday purchases, and so there's a scarcity value of these kinds of networks that do this business.
STEWART: So your other point was that this'll matter financially for people who have shares in Visa?
Ms. SIDEL: Sure. If you buy shares in the IPO.
STEWART: All right so Rachel, did any of that make you care? You can be honest.
RACHEL MARTIN, newscaster:
I care more now than I did 10 minutes ago.
Ms. SIDEL: That's a start.
(Soundbite of laughter)
MARTIN: You always have to gauge that against what other priorities you have in your life, but I do care more.
STEWART: All right, I'll care if you tell me how this'll trickle down my daily transactions, if at all.
Ms. SIDEL: It will, I think eventually, trickle down as, as I said, they make these advancements in technology, and they will know that somebody like you does your shopping at 8:00 p.m., and instead of getting some kind of offer for baby food when you're a 35-year-old single male, perhaps you'll be getting some kind of offer for a discount or a special kind of purchase at, you know, the book store that you usually go to at 8:00.
STEWART: All right. So if people have listened to this segment and decide to watch this closely, that's their business, but it is the business of Wall Street to watch these kinds of deals. How closely is this being watched?
Ms. SIDEL: Oh, it's being watched really closely. And for the banks that own Visa, a lot of them are also underwriting this deal. So they're going to sell their shares and make money off of that, and then they're also going to be making money by earning the fees to underwrite this deal. So banks could certainly use the money these days. They're not doing as well as they had been. So it's going to be quite the windfall for them.
STEWART: Robin Sidel is a banking and credit-card reporter for the Wall Street Journal. Hey, thanks for playing Make Me Care. I hope it wasn't too painful.
Ms. SIDEL: Not too painful at all. Anytime. Thanks.
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STEWART: Hey, don't go anywhere. Next on the BRYANT PARK, why does food taste the way it does?
MARTIN: Because it's good or bad.
STEWART: We tackle the big questions here on the BRYANT PARK PROJECT. Our producer, Ian Chillag, went to a class. There's actually a class that teaches you while you eat about what you're tasting and why, and he ate, and he tasted, and he's going to report on what he tasted coming up.
MARTIN: Also coming up, I want to tell you a little bit. We're going to go take a ramble through the news, including some dogs in Düsseldorf who are going to have some special new outfits. They're police dogs, by the way. Stay with us here. This is the BRYANT PARK PROJECT from NPR News.
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