Since its initial public offering, Visa's (NYSE:V) stock performance has been nothing short of extraordinary. In its very first day of trading, shares jumped 28% over their IPO price, kicking off a seemingly endless rally that continued for years. I've compiled what I believe to be 10 of the biggest events that define Visa's history as a publicly traded company, with each event marked on the chart below.
1. A record IPO
On March 19, 2008, Visa's IPO prices at $44 per share ($11 per share when adjusted for a later stock split). The company earned the title of being the largest U.S. IPO in the history of the stock market. The next day, the first day in which shares were traded on the New York Stock Exchange, the stock closed at $56.50 per share ($14.13 per split-adjusted share).
The IPO was remarkable in context. Remember, this was March 2008, just five days after JPMorgan offered to buy the remnants of the battered investment bank Bear Stearns for just $2 per share. It was a trying time for financial stocks, but Visa was a clear exception.
2. Visa can't shake its financial industry association
What investors like most about Visa is that it isn't a lender. It doesn't make credit card loans, and it certainly wasn't issuing mortgages that caused the crisis in the first place.
Visa is simply a payment network -- a toll road -- and it collects a fee on every swipe of a Visa card. But being far removed from problematic loans couldn't keep its share price from following the financial stock slump in 2009. On Jan. 20, 2009, Visa shares ended the day at their all-time closing low of $42.42 ($10.60 per split-adjusted share).
3. Regulators have a field day
Just as the IPO window was open to Visa in 2008, the regulatory window was wide open in 2009 and 2010. On May 13, 2010, the Durbin Amendment to the Dodd-Frank Act was revealed, which, if passed, would have directed the Federal Reserve to ensure that debit interchange fees were "reasonable and proportional to the processing costs incurred."
Stated differently, the goal of the Durbin Amendment was to make processing debit transactions less profitable.
A statement by then-Senate Majority Leader Dick Durbin (D-IL) made his targets quite clear.
Wall Street reform is really about two things: holding the big banks accountable for how they operate and empowering consumers to make good financial choices. Passage of this amendment is a win for the public on both fronts.
Passage of this measure gives small businesses and their customers a real chance in the fight against the outrageously high "swipe fees" charged by Visa and MasterCard. It will prevent the giant credit card companies from using anti-competitive practices, allow merchants to offer discounts to their customers and restore common sense and fairness to this broken system.
By requiring debit card fees to be reasonable, and by cleaning up Visa's and MasterCard's worst abuses, small businesses and their customers will be able to keep more of their own money. Making sure small businesses can grow and prosper is vital to putting our country back on solid economic footing.
You can tell from the language in Durbin's statement that this was no ordinary time. Financial companies of all stripes -- banks and non-banks -- were universally hated all the way from the halls of the Senate to Main Street USA. Visa shares plummeted after Durbin's statement was released.
4. The Fed shocks banks and card networks
Empowered by the Durbin Amendment to oversee debit card fees, the Federal Reserve outlined a proposal to cap interchange fees on Dec. 16, 2010. It suggested capping interchange fees at $0.12 per transaction, a fraction of the then-estimated average fee of $0.44 per swipe.
After recouping roughly half of the Durbin-inspired decline, Visa's stock took a nosedive. Investors broadly feared that profits would be regulated away.
5. Durbin's dustbin
The Fed's plan to cap debit fees at $0.12 per transaction faced stiff opposition from the financial industry. On June 29, 2011, the Federal Reserve issued its final rule, which capped interchange fees at $0.21 plus 0.05% of the transaction amount. The Fed allowed for the fee to increase by $0.01 per transaction if certain security measures were implemented.
Visa shareholders breathed a sigh of relief, and share prices rocketed. Matthew Yglesias, a writer for Slate.com, may have written the best take on the company's rapid share price appreciation:
A stock that sold for $75 on July 28 is suddenly worth more than $86 the next day. What happened? Did they invent some magical new form of credit card? Of course not. Instead, Visa joined its comrade MasterCard in popping the champagne over the Federal Reserve's surprisingly light regulatory touch.
For reference, the split-adjusted prices of Visa in the above quote were $17.75 and $21.50, respectively.
It's hard to overstate just how important the Durbin Amendment was to Visa stockholders. In its 2011 annual report, Visa reported that over $1 trillion of debit transactions moved over its network in the United States alone, substantially more than the $641 billion of credit transactions it processed the same year.
If you held shares of Visa back then, you certainly remember the Durbin Amendment as being a very big deal. If not, you can rest assured this is the last time I'll mention it. But for the sake of closure, I must mention that the amendment went into effect on Oct. 1, 2011.
6. Visa links up with JPMorgan
On Feb. 26, 2013, The Wall Street Journal reported that Visa and JPMorgan Chase quietly agreed to a 10-year deal that would allow JPMorgan to effectively lease Visa's network for its cards.
Under the terms of the agreement, JPMorgan agreed to shift more of its card volume to Visa, while Visa gave the bank abilities that effectively created a quasi-closed loop card network akin to Discover and American Express.
The bank wasted no time in putting Visa's network to work. Its merchant processing volume ramped up quickly as its customers began to work directly with JPMorgan for payment processing. In 2012, the bank processed $655 billion of merchant volume, which grew to $949 billion in 2015.
7. Becoming a "blue chip"
Visa joined a very exclusive list on Sept. 23, 2013, when it became one of just 30 companies included in the Dow Jones Industrial Average. Shortly thereafter, its biggest competitor, MasterCard (NYSE:MA), announced that it would split its shares 10-for-1 in what might have amounted to an effort -- albeit a late one -- to be the payment network of choice in the Dow 30.
Visa is still a component of the Dow Jones Industrial Average today.
8. On the road to China, maybe
Shares of Visa and MasterCard surged on Oct. 29, 2014, as China's announcement that it would loosen rules gave UnionPay an effective monopoly on transaction volume inside its borders. The news was compounded by Visa's and MasterCard's positive earnings releases and reports that the economy was growing at the fastest pace since the Great Recession -- 3.5% during the third quarter of 2014.
Alas, for all the excitement about China then, little is happening now. Visa's 2015 annual report tells the tale:
Though the Chinese State Council has announced that international schemes, such as Visa, would be able to participate in the domestic market and be eligible to apply for a license to operate a Bank Card Clearing Institution (BCCI) in China, legislation and implementation guidelines for BCCI's have yet to be published and finalized.
9. Visa does the splits
On March 19, 2015, Visa began trading after completing a 4-for-1 split in which shareholders saw the shares they owned multiplied by four. After closing at $267.67 per share prior to the split, shares closed the following day at $66.81 each.
10. Reconnecting with a long-lost twin
Long awaited by Wall Street, Visa announced its plan to acquire Visa Europe on Nov. 11, 2015. The deal, valued as richly as 21.2 billion euro, would unify its brand around the world.
In the press release, Visa noted that acquiring its European brother would put more than 500 million more cards and more than 1.5 trillion euro of annual purchase volume under the Visa umbrella. The deal was finalized on June 21, 2016, putting all the pieces of Visa back together again.
A trip down memory lane
The most amazing thing about Visa is that at no point has it ever been statistically cheap. It frequently trades at significantly higher earnings multiples than the market at large. But multiples are backward looking, and its growth has been tremendous.
Even at 58 years of age, Visa is still delivering with double-digit annual increases in profits, buoyed by continuous growth in payment volume. With each passing year, inflation increases the amount of money in circulation and cash loses share to cards, pushing more transaction volume to Visa's network. Those two very simple themes have underlain its spectacular returns since its IPO, rewarding its most loyal investors very handsomely over the last eight years.