Tuesday, March 18, 2008

BIGGEST IPO EVER: VISA IPO - the 10 billion dollar legal defense fund?

Have you all heard about the VISA IPO? This is probably the largest initial public offering in history.

The "slightly hidden" official story is that "Visa has said it plans to use IPO proceeds to fund expansion and an escrow account to help cover legal bills."

Betcha you missed that part in the news coverage of this IPO?

IPO, by the by, means initial public offering - meaning VISA will now be traded on the stock market.

Which makes AG go hmmmmmmmm - whyyyyyyyy IPO now.... And what exactly do they mean by 'help cover legal bills', in a Reuters article that everybody missed from Nov 9, 2007?

Exactly what did VISA do to make it a target of a multi billion dollar lawsuit?

Lets use the ever dangerous twin weapons of google and reuters.com.....

AmericanGoy goes Hmmmmmmmmm!
Reuters to the rescue yet again.

Perhaps this news was missed by everybody, because of the financial lending institutions almost collapse and the FED Bernanke and co. riding to the rescue (of the Bear Stearns management, mostly).

Lets huddle and tick off the facts.
1) The VISA IPO is the BIGGEST EVER in history. Ever. In history.

2) VISA needs billions of dollars for legal costs which are:

a) Settlement with American Express, in which VISA must pay AXP (Amer. Express) $2.25 billion (I kid you not - see the Reuters article)

b) already existing lawsuits and other, soon to come lawsuits?

OK everybody sit down. Take a deep breath.

We are going for a ride.

Reuters article, Nov 7, 2007:

(...)confirms that it has reached an agreement to drop Visa as a defendant in a lawsuit alleging that MasterCard, Visa and their member banks had illegally blocked AXP from the bank-issued card business in the United States. Under terms of the settlement agreement, Visa will pay a maximum amount of $2.25 bln to AXP

Hopefully you realize how big this is. Since AXP (American Express) has sued and basically won its case (VISA decided not to defend itself but settled out of court), this opens VISA for more lawsuits from other parties. Because I personally, for example, wanted to use my beautiful, shiny American Express Card and was prevented from using it by the eeeeeevil VISA - in many places in America. Hell, there was even a commercial that VISA is accepted everywhere while American Express... yeah.... I think I am getting an urge to sue - my toes are getting curled, and I get that gleam in my eye.

Can you say class action suit boys and girls?

Can you say that the VISA IPO of $10 billion might be juuuuuuuust enough to pay that class action lawsuit off? Or perhaps - not quite enough?

Lets read up a little bit more of the Reuters article:
Individual banks named in the lawsuit will also be dropped as defendants. These include: J.P. Morgan Chase, Capital One, U.S. Bancorp, Wells Fargo and Providian. The agreement is subject to the approval of Visa's member banks. Under terms of the agreement reached with Visa, Inc., Visa USA, and Visa International, AXP will receive an aggregate maximum payment of $2.25 bln.

I don't need to explain this do I?

This is simple!

Not just VISA was named in the anti-trust lawsuit by AXP, but also J.P. Morgan Chase, Capital One, U.S. Bancorp, Wells Fargo and Providian. Hmmmm what was J.P. Morgan involved with a day ago.... Hmmm, something small like the Bear Stearns buyout?

The scandals are happening so thick and fast... even I can lose track of it all.

Here's what I believe happened.
Bear Stearns, because of its criminal activities in the subprime and ARM loans, and hedge funds, would be a target of a record, out of this world, lawsuit. This would be the class action that would perhaps dwarf the tobacco settlements (perhaps).

In today's day and age, this could not be allowed to happen.

Here's the play.

Bear Stearns is sacrificed, to prevent the lawsuits from angry investors from destroying the company anyway, and taking the stock market into a guaranteed recession. Next, J.P. Morgan purchases them for less money than their (Bear Stearns') real estate and buildings are worth. All supervised by the FED and (put your conspiracy hat on) the elite, perhaps people we have never heard of and whose names do not appear in the mainstream newspapers nor CNBC. Or perhaps I am not into those "privileged few" social circles to know them - I make good money, but nothing like $20+ million a year...

VISA now must shoulder the lawsuit from American Express, alone, because otherwise not just VISA would be hit but all the other institutions including J.P. Morgan etc.

VISA is now a BIG target for a class action lawsuit and individual lawsuits, while the rest of the big players have... exited the stage, door left....quietly and on tip toes. VISA has become the only target (even though nothing is stopping you and me from suing, say, J.P. Morgan anyway - but it's all about perception in America these days).

Hence, the biggest initial public offering in the history of the world, happening with nary a whisper on the TV or newspapers - happening NOW, today.

For those in the know, this will be spun in financial articles as good news - VISA props up the financial markets hooray!

There is a slew of articles with "Hooray VISA IPO!" themes, as for example the one in USAToday March 18, 2008 - today explains: Visa raises $17.9B in largest-ever U.S. IPO.

Notice that the American Express article has no mention of 'legal bills', lawsuit or American Express... Curious. I looked over other articles about this IPO and there is no mention of the American Express/VISA settlement/lawsuit from 2007as the main reason for this VISA IPO.

Like it didn't happen.

It is not to the advantage of BIG business for you to know this... and get on the sue bandwagon.

I am off now to find my American Express statements to make a personal, small scale class action suit...

Now, about MasterCard which also was sued alongside VISA... Curious.

Elliot Spitzer? Prostitute scandal? Gee, what did Obama's pastor say again? Gosh so many stories to report in the media.... Distracted much, America?

Perhaps there is another angle to this.
Feel free to comment/email me your views on this.

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MisterKeitel said...

AmGoy- Hi! Are you saying that it might be unsafe to invest any money in this Visa IPO? I'm a realy know-nothing when it comes to money (but I'm really reading and trying to understand and blogs like yours and news stories help alot)so I've hired a financial advisor to invest my money in diversified stocks. Most of them are ones that don't appear in the news much. But I do know he was talking about investing in the Visa IPO. Is that a bad idea? Sorry to ask dumb questions. Thanks.

I think you write some great stuff on your blog.

AmericanGoy said...


Two things -

1) I am not a bona fide financial/stock market expert.

which is good because

2) financial experts exist to make money off suckers.

For my advice on investing, please read 'Mutual Funds' article - find it on the right hand side in the box.

Good luck!

Anonymous said...

This also has much to do with the recent collapse in commodities, with gold taking it on the chin. A month ago, I wrote,

"If so (the US banks benefit from the IPO), there be short term danger for the PM's. A shot in the arm for the banks at a time of reduced liquidity and possible foreign inflows due to the IPO. Gold could take a hit as the USD gets a temporary bid with foreign money for the IPO."

I also feel this is priced to perfection, and that the investment bankers will at some time short V to make money on the way down too. It is in their nature...

I will not short this thing, but will not buy it until its worth is better known.

In my opinion, GLTA

Jon said...

I know this post was a while ago. However, there is untrue information in "fact" number one. To make a correction if anyone comes across this in searches, the largest IPO in history was Industrial & Commercial Bank of China (ICBC), which raised an unprecedented US$19.1 billion in October 2006.

To be clear, VISA is the largest IPO in U.S. history. It raised US$17.9 billion. VISA ranks #3 worldwide to date — Japan’s NTT Mobile Communications Network raised US$18.05 billion in 1998.