MADELEINE BRAND, host:
Back now with DAY TO DAY. I'm Madeleine Brand.
The markets are struggling, the economy has slowed to a crawl, not exactly the best timing if you want to take your company public. But that is not stopping Visa from moving ahead with what could be the biggest IPO in American history. Marketplace's Sam Eaton joins us now. And the biggest, well, how big is it?
SAM EATON: Big, Madeleine. Visa's talking about raising up to $19 billion in an initial stock sale. That pretty much blows the previous record completely out of the water, that being AT&T Wireless' $10.6 billion IPO back in 2000. Even Visa's main competitor, MasterCard, didn't come close. It recently went public for about two-and-a-half billion dollars.
BRAND: So why now? Why does Visa want to go public now?
EATON: Well that's exactly the question many on Wall Street are asking right now. With the tanking housing market, the slowing economy - they're wondering whether consumers will keep wielding those credit cards like they did during the good times. But there's also a chance that things won't get worse. A report out today shows that the majority of business economists predict the U.S. will narrowly avoid a recession. And even those who say we will hit a recession are forecasting it to be short and shallow.
BRAND: So Sam, is Visa betting on an economic turnaround? Or are they just betting on the fact that when things are bad, people do have to use their credit cards more?
EATON: Well some definitely see it as a bet on that the stock market may have reached its bottom. But on the other hand, Visa could also be trying to get this deal through before things get any worse. But the bottom line is that it doesn't - it may not matter so much. Even if the economy does slip into a recession, Visa may be somewhat immune.
I talked to David Weiss, the chief economist for Standard & Poor's, and he says you have to remember that Visa isn't as vulnerable to the credit crisis, which is causing a lot of this economic turmoil, because it doesn't issue any credit, it just charges a fee for every transaction made by card holders.
Mr. DAVID WEISS (Economist): You use your Visa card and your bank back here in New York; all those transactions have to go through Visa in order to clear from one bank to another. And that's been a very profitable business because people are using credit cards more and more. They're going to continue to use credit cards for transaction purposes even as they cut back on their credit card balances.
EATON: Now Weiss says convenience is the main factor driving that use and even a recession won't cause any drastic changes to that.
BRAND: And what does Visa stand to gain by going public now?
EATON: Well, despite what David Weiss was saying about Visa's immunity of the credit crunch, the banks which own Visa haven't been so lucky. So taking Visa public allows them to harness a tidy chunk of change, so to speak. Not enough to offset all the losses from the mortgage crisis of course, but a little can go a long way right now.
BRAND: Thank you, Sam, that's Sam Eaton of public radio's daily business show, Marketplace.
Unidentified Man: Next time on Marketplace, saving energy and saving money are a pretty good combination. Annoying buzzing and bad lighting are not. It's those compact fluorescents from American Public Media.
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