WALL STREET – Shares in Visa Inc. soared as much as 50% as the market opened yesterday before closing at $56.50, a 28% premium over the initial public offering price.
The first-day pop earned credit unions and banks millions of extra dollars for the Class B shares they are being issued as part of the biggest ever U.S. IPO. Visa plans to redeem the Class B shares for publicly traded Class A shares at a rate of 0.72 Class B shares for each Class A share. That would set the value of the Class B shares at $40.68 each, based on yesterday’s closing price.
The offering, which went public at $44 a share Tuesday, raised almost $18 billion for Visa. It is expected to raise as much as $2 billion more when the underwriters exercise their overallotment, as expected for the hot issue, making it the largest IPO in U.S. history.
Visa is expected to set a mandatory redemption of some of the Class B shares in order to capitalize a litigation reserve to fund expected settlements of various lawsuits. It is unclear how much of the Class B shares will be covered under the mandatory redemption.
The redemption, or buyback, comes at a good time and can be used to offset rising loan losses at some credit unions.
Visa shares, which trade under the symbol “V” on the NYSE, are expected to continue to rise in the otherwise gloomy equity markets.
