Visa IPO Aftermath: Europe’s in Trouble, China’s Buying in Bulk

Maybe Visa already knew this was coming three years ago. That’s when the company consolidated its global networks, but left its European section out in the cold, as a licensee instead of a division of the shiny new Visa Inc. Or maybe the EU’s “special” (read: difficult) corporate legal structure influenced that decision before this particular case was on the docket.

Either way, Visa Inc. (V) is looking pretty smart right now: The European Commission just opened antitrust proceedings against Visa Europe.

The antitrust investigation is standard procedure, according to the commission. But when Mastercard went through the same standard procedure last year, the commission ruled that its exchange fee system was contrary to the EU’s antitrust rules.

This doesn’t bode well for Visa Europe, which has to prove that it doesn’t force vendors to pay exorbitant exchange fees if they accept its cards.

Visa IPO Aftermath: Fees limited allover

With the Fair Fee Act making the rounds in Washington, Visa Inc has enough to worry about stateside without keeping an eye on the EU.

To counteract a possible restriction on its fees in the U.S., Visa has been pushing heavily into markets like China and Brazil, where credit is a new, exciting idea just being discovered by the nouveau prospere (well, I can’t call them riche, just yet, but they’re thriving all the same).

And now China is pushing back, or at least taking an interest in a company that has developed such an avid interest in the pocketbooks of its population. The Chinese sovereign fund (the real one, not just a company that’s owned by the Chinese government) has piled more than $100 million into Visa stock.

Visa IPO Aftermath: China takes a stake

China Investment Corp [CIC], a $200 billion fund, bought the shares in Visa’s IPO last week. And its seen a 43% gain on its investment, as of market close today (Thursday). CIC already has a $5 billion stake in Morgan Stanley (MS) and a $3 billion investment in Blackstone (BX). I assume this means the fund is looking very long-term in its investments since both of those companies are struggling to regain their stock strength.

China Life Insurance (LFC) bought three times as much as the CIC, weighing in with a hefty $300 million investment in Visa’s IPO. LFC is China’s largest life insurer by premiums.

And if you think about it, the buy-in is only fair. If the credit card issuer wants the Chinese to “take Visa,” the company will have to give a bit back in stock appreciation.

Comments

[belmont:]

which chinese banks if any yet, are clients of visa? it's not the popularity of the card to the chinese people but rather which banks and institutions will issue them which makes the cards popular. who are visas clients in china or asia for that matter.

2008 Mar 30 02:48 PM

[GTH:]

As VISA seasons and the quiet period ends coupled with overseas growth it's going to be fun to watch VISA overtake Mastercard on stock price just as it has on marketshare.
The real interesting thing will be to read the news articles after the fact and read the comments from people who missed the run.

2008 Mar 30 02:50 PM

[WALSTREETWIL:]

lETS JUST SEE HOW MANY MORE FORTUNATE PEOPLE COME ALONG IN THE NEXT FEW WEEKS AND GET IN UNDER THE $44 IPO PRICE. MAYBE IF THEY KEEP IT UP THE PRICE WILL BE AROUND $20 BY JULY. OH YEAH THEN NOT TOO LONG AFTER THE B SHARE HOLDERS WILL COME ALONG AND SELL EVERYTHING NO MATTER WHAT THE PRICE BECAUSE THEY HAVE ALLREADY SOAKED IN MAJOR PROFITS FROM THE FIRST SELL OFF THEN EVERYONE ELSE THAT WAS HELD BACK WHILE THE SUPREME INVESTORS GOT IN AT THE BOTTOM WILL SEE THEIR SHARES BE WORTHLESS. iT IS TOO BAD THAT THE SEC LETS THIS CRAP HAPPEN. gOOD LUCK TO ALL...

2008 Mar 30 03:13 PM

[User 169775:]

to answer Belmont's question:

en.wikipedia.org/wiki/...

Virtually all of the cards issued in that network in China are Visas or Mastercards.

2008 Mar 30 04:39 PM

[fausten:]

always china bank issue credit card union with visa. for example, i use MINSHENG credit card, and it also a VISA card.

2008 Mar 30 06:02 PM

[WTO_watcher:]

The China UnionPay System 's monopoly will need to end next year as determined by the World Trade Organization. This is one of the "small" things that China 's Financial system needs to do in order to keep up with the rest of the world financial community. That will leave the system open for competition (within China) where Visa, Mastercard, and others will be able to get in.

2008 Mar 30 07:19 PM

[Pouya:]

GTH,

Visa already trades at a premium over MasterCard. Compare their PE ratios.

2008 Mar 30 08:19 PM

[No Moss:]

UnionPay is used for the vast majority of domestic bank withdrawals and purchases. It's almost free, universal, secure, and dependable. It's virtually useless overseas--a big fee for a cash withdrawal in Hong Kong, for instance. It's also useless for foreigners, since it's only available in China.

Chinese need Visa or MasterCard (or AmEx) cards for use overseas. I believe most credit cards are Visa or MasterCard cards. The people who can get credit are also people who can afford to travel, I imagine.

The two companies will dominate Chinese spending overseas, and foreignrtd spending in China.

2008 Mar 31 01:18 AM

[Dmitriy:]

I see VISA at 80 easily by the summer.

2008 Apr 03 12:37 PM