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Visa IPO: “Don’t be suckered in!”

Posted March 6, 2008

"Do not forget, Visa recently announced it lost $861 million last year, on revenues of over $5.2 billion. Numbers like that do not deserve the $38 billion market cap Visa is expecting. Stay away from this one, at least until it sheds its early overvalued price." — Andrew Snyder

by Andrew Snyder

Baltimore — (TFN): Don’t be suckered into the Visa IPO. Unless, of course, you are a fan of losing money.

The world’s most popular credit card is once again trying to charge consumers for something they did not buy. When the company heads to Wall Street for its initial public offering in the next few weeks, Visa plans to generate the largest proceeds ever in an IPO. It could bring a capitalization of nearly $38 billion.

I say "could" bring, because this one is going to be a flop.

Pressed for time? Listen to the video soundtrack!

If you have followed the markets, you may recall Mastercard went public and made many of its early investors filthy rich. Its share price has soared by over 350% since its public debut. Visa is trying to piggyback on that momentum. Only this time, it is starting big and hoping to get even bigger.

It will not happen

The banking industry is already on its knees. Economists are shouting about an impending recession. And nobody on Wall Street is willing to pay a premium, especially for a company in the banking sector. Mastercard was successful because it went to its IPO grossly undervalued.  As the economy took off and interest rates rose, investors quickly realized the company’s true worth. Now Visa wants to do the same thing.  But it’s too late.

Do not forget, Visa recently announced it lost $861 million last year, on revenues of over $5.2 billion. Numbers like that do not deserve the $38 billion market cap Visa is expecting.

Stay away from this one, at least until it sheds its early overvalued price. Once share prices drop by 15 or 20%, investors will be jumping ship like crazy. That is when it is time to grab your boarding pass and hop on.

Don’t fall for the IPO mousetrap. Be patient and make your gains after the dust settles.  

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Posted by Andrew Snyder · Filed Under US Stocks and Markets 

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