Visa Inc. hopes to cash in on its massive credit and debit card network by raising up to $10 billion in what would be the second largest initial public offering of stock in U.S. history.
The San Francisco-based company disclosed its target amount late Friday in documents it filed with the Securities and Exchange Commission, a significant step in a hotly anticipated IPO expected to take place early next year.
Visa didn't specify how much stock would be sold or at what price per share. A proposed ticker symbol wasn't listed either. All that information will emerge in future filings leading up to the IPO.
If Visa realizes its $10 billion goal, it would be raising the second most ever generated in an IPO by a U.S. company, according to data maintained by the research firm Renaissance Capital. AT&T Wireless Group raised $10.6 billion in an IPO completed in April 2000 near the height of the dot-com boom.
MasterCard Inc., Visa's next largest rival, went public 18 months ago, raising $2.4 billion in the 17th largest IPO in U.S history, according to Renaissance Capital. MasterCard's shares have climbed by nearly fivefold from their IPO price of $39, closing Friday at $193.
The demand for Visa's stock is expected to be high because the company's revenue figures to steadily grow as consumers increasingly pay for merchandise with credit or debit cards instead of checks or cash.
Visa's payment processing network is by far the largest in the United States. Last year, the company processed 44 billion transactions totaling $3.2 trillion, according to Friday's SEC filing. MasterCard processed 23.4 billion transactions totaling $1.9 trillion.
Visa makes most of its money from the fees it charges card issuers and merchants for using its network. During the first nine months of this year, the company earned $771 million on $3.7 billion in revenue.
Because it acts as an intermediary, Visa doesn't sustain losses when consumers don't repay the debts run up on credit cards bearing its brand. Those liabilities instead fall to the banks that issue the cards and set the terms of repayment.
Most of Visa's major stockholders are banks. They include: J.P. Morgan Chase & Co., which owns 23.3 percent of the company's Class B Stock; Bank of America Corp., 11.5 percent; National City Corp., 8 percent; Citigroup Inc., 5.5 percent; U.S. Bancorp, 5.1 percent; and Wells Fargo & Co., 5.1 percent.
Besides being a major stockholder, J.P. Morgan also is Visa's largest customer. The New York-based company accounted for 10 percent of Visa's revenue during the first nine months of this year.
The SEC documents didn't indicate whether any of Visa's major stockholders intend to sell portions of their stakes in the company.
Visa's filing came just two days after the company rid itself of a potential albatross by agreeing to pay up to $2.25 billion to American Express Co. to settle a 3-year-old lawsuit alleging Visa engaged in illegal practices to stifle competition. Visa is responsible for $2.07 billion and another $185 million will be contributed by five member banks named in lawsuit, according to the SEC filing.
All the costs of the American Express settlement ultimately will be covered Visa's member banks.
Visa is still fighting a similar antitrust lawsuit filed by Discover Financial Services. That case is scheduled to go to trial next September.
The filing also disclosed that Visa has already paid its chief executive, Joseph Saunders, $10.2 million in bonuses this year on top of his annual salary of $950,000. Saunders, who was named CEO six months ago, has promised to remain on the job until May 15, 2009.