Visa Already Twice MasterCard's Market Cap

IPO history was made today with Visa's (V) record $17.9 billion offering. At $60 per share (where the stock opened in the secondary market), Visa's market cap is $58 billion. Below we highlight a chart of Visa's market cap versus MasterCard's (MA) market cap.

As shown, Visa's is currently more than double that of MasterCard! In the first quarter of 2008, Visa had revenues of $1.49 billion. MasterCard hasn't released Q1 '08 revenue numbers yet, but current estimates are for $1.06 billion.

Comments

[Fool99:]

Still, though - who taught this author to do math? Market cap at $60/share is nowhere near $58 billion...not to mention that the chart included is completely useless and would be even if it were accurate

2008 Mar 19 01:58 PM

[D Ramirez:]

Voodoo math doesn't equal 58 bil in market cap. thanks for trying but you're wrong. they are about equal give or take 1bil...

2008 Mar 19 02:08 PM

[Fool99:]

My point exactly

2008 Mar 19 02:41 PM

[smooth:]

Say what? There were 406 MILLION shares priced at $44/share last nite. There is another 40 million shares that could be added to that total.

So even if we took 446 Million shares times the current price of $59/share...we come up with a MARKET CAP of $25.86 Billion, which
is LESS than Mastercards current market cap at $27.6 Billion.

Obviously, someone doesn't know how to do simple math.

Hey author, you need to correct your mistake!

2008 Mar 19 02:42 PM

[smooth:]

Obviously the author does NOT have the humility to correct his WRONG headline and WRONG numbers!

People...do the math yourself! Visa's market cap is still LESS than Mastercards.

Dan Davidowitz is a Portfolio Manager and Research Analyst at Polen Capital Management, who owns shares of Visa rival MasterCard says Visa's prospects are good.

"These (Visa and MasterCard) are great franchises with the right profit incentive. There's a lot of leverage in this business, margins are probably better than ever," he said.

Davidowitz said that profit margins are likely to continue growing at Visa, because it's pretty much a fixed-cost business. In other words, it doesn't really cost Visa much for new customers.

"There are not a whole lot of incremental costs," he said, adding that, "revenues will grow, profits will grow faster. No one else really does this."

Late Tuesday, Visa priced the hotly anticipated offering of 406 million shares at $44 each, pegging total proceeds at about $17.86 billion.

2008 Mar 19 02:52 PM

[Wez:]

I've been asking this in other VISA threads, nobody answers me. Someone school me please. It sucks only hearing positives, there are always negatives.

What exactly do they own? What will stop a competitor from entering the market with such lucrative incentives as 18 billion dollar IPOs? What are the barriers to entry? Are they not just a middle man charging a fee? Doesn't the internet specialize in destroying middle men?

2008 Mar 19 03:07 PM

[barrelmaker:]

Market Cap = Share price X # of shares outstanding. The 406 Million shares sold in the IPO today is not 100% of V shares outstanding.

If you review their S-1 filing, you will find that the total # of shares outstanding, including all classes of their stock is approx. 966 Million.

Subsequently, assuming all of the planned conversions of class b and class c stock go off as described in their S-1, they will have 808 Million shares outstanding.

Thus, their market cap equals:

60 X (either 808 Mil. or 966 Mil.), which is somewhere between $48 Billion and $58 Billion.

2008 Mar 19 03:09 PM

[Michael B. ...:]

www.sec.gov/Archives/e...

2008 Mar 19 03:51 PM

[Fool99:]

There are 406 million shares of float stock. Price x float ("tradable") stock = market cap. That's how S&P calculates it, anyway. It seems a bit preposterous to assume the price would stay stable if the number of public shares suddenly doubled.

@ Wez: They own the processing, the network, and the brand. The latter, I think, is the most important. How many times have you gone into a store or restaurant where they take AmEx or Discover, but DON'T take Visa? The first two need to sell hard to merchants; Visa just sits there, and merchants beg to sign up.

Doesn't mean their stock will soar, but they're the dominant force in an easy-to-understand industry with an easy-to-understand business model. They seem kind of like Coca-Cola in that respect...

2008 Mar 19 04:38 PM

[Michael B. ...:]

The float reflects 52% of the total capital stock. So if you could buy all of the 406M shares, you would only own 52% of VISA.

Same goes for BX. They only sold a fraction of the company at IPO; the float is smaller than total outstanding shares.

2008 Mar 19 04:41 PM

[Michael B. ...:]

Market cap = Total outstanding shares * price.

Not = float * price.

2008 Mar 19 04:41 PM

[xxoo:]

Sure are alot of you amateurs out there. I guess that is why there is a market! Read barrelmaker's comment he is right on. ipo's are priced to its competitors. at $42 it was relative to MC, based on sales. Do you people even know what a market cap is? 408 million shares is the amount that was sold today. What company sells 100% of shares! think about it.

2008 Mar 19 04:47 PM

[CFA1227:]

Thanks barrel and Michael for clarifying the market cap calculation. In most (if not all) IPOs the companies don't sell anywhere near the total amount of shares outstanding. Consider the Google IPO in 2004. Google sold about 19.6M shares and raised about $1.67B in cash. The stock price went up to a slightly over $100/sh. Does this mean it had a market cap of only about $2B that day? Of course not. Google had about 271M shares outstanding at the time and the $100/sh gave it a market cap of approximately $27B at the close of that day.

Since barrell did his due diligence on the S-1 and got to 808 or 966M shares outstanding, are their estimates on net income and/or EPS for 2008? Based on these shares outstanding numbers, it seems that the PE ratio at this point is somewhere between 35-40 which is significantly higher than MA. I'm sure we'll see the official estimates on Yahoo and other sources soon enough.

2008 Mar 19 05:33 PM

[Michael B. ...:]

I deal with the valuations in my upcoming seekalpha article. Here's the original link. Your numbers are pretty spot-on though.

scriabinop23.blogspot....

2008 Mar 19 05:49 PM

[Wez:]

Fool99

Thanks for the response. Brand I understand. Its the processing and "network" I don't get. Processing can be done by low paid Asians. The "network" refers to VISANet, which is what? The internet? It's not the little machines at every retailer because those take all cards, not just VISA. So what is this network?

If someone can once and for all settle this market cap question, I would love you for ever.

2008 Mar 19 05:59 PM

[Rep07:]

Hey what about the Brazilian Visa (VisaNet Brasil)? They are going public separately, and soon. When is that? Another winner probably.

Also there is Redecard (RDCD3.SA). Where does it fit in to the picture?

2008 Mar 19 07:49 PM

[Jon Doherty:]

Market cap is figured by shares outstanding X price per share. If you buy up all outstanding shares you own the company. shares held by the company are used for enrichment of the officers and directors, splits. & purchases of other companies. All would dilute the stock.

2008 Mar 19 11:09 PM

[TN Jim:]

Fool99 may not understand how market cap is calculated, but at least he has sufficient self-awareness to pick an appropriate moniker for himself.

2008 Mar 20 01:20 PM

[Wez:]

A lot of people are getting the market cap wrong at this point.

2008 Mar 20 02:27 PM

[lips:]

so who owned V before it went IPO?

2008 Apr 17 04:57 PM