(03-19) 13:58 PDT SAN FRANCISCO -- Visa Inc. ignored the bear market on Wall Street and carried out the biggest-ever U.S. initial public offering in style, with its shares surging 28 percent Wednesday in their first day of trading.

Investors clamored for Visa stock, seeing the San Francisco credit and debit card processor as the dominant player in one of the world's fastest-growing businesses - the use of plastic instead of cash and checks for everyday payments.

"This is a very good company going public in a difficult market, and people are pretty pleased with the way it's acting," said Mark Lehmann, head of equity trading at San Francisco's JMP Securities. "There are a lot of portfolio managers putting money to work in this stock."

Visa shares closed Wednesday at $56.50, up $12.50 from the $44 IPO price. They had risen above $60 before settling in the afternoon. Volume was heavy, with more than 175 million shares changing hands.

Visa's IPO price was above the $37 to $42 range projected in company filings with the Securities and Exchange Commission. The company sold 406 million shares in the offering, raising just under $18 billion.

If the IPO underwriters exercise their option to sell another 40.6 million shares at the offering price, Visa will raise about $19.7 billion, before subtracting fees and other costs. That far surpasses the $10.6 billion AT&T Wireless IPO in 2000, previously the biggest U.S. initial offering.

Even with the enormous quantity of more than 400 million shares to unload, Visa's IPO orders swamped the supply of shares available, several people close to the deal said.

"They priced the deal above the proposed range because there was lots of demand," said Nicholas Einhorn, an analyst with Renaissance Capital, a Connecticut firm that tracks the IPO market. "That's impressive, given how rocky the stock market has been."

With the IPO oversubscribed, institutional investors got only a portion of the shares they sought. And some small investors were skunked altogether.

Oakland resident Bruce Folck, a Fidelity Investments brokerage customer and an experienced IPO investor, put in an order to buy 200 shares in the offering. Tuesday night, Fidelity sent an e-mail asking him to confirm that he was willing to pay the IPO price, which he did. But he was left empty-handed.

"I woke up this morning hoping, hoping, hoping," he said Wednesday. "But there was nothing and I saw the stock was up $16. I was furious."

At Fidelity, demand for Visa IPO shares was high relative to the number of shares the brokerage was able to get for its retail clients, spokesman Steve Austin said.

"Our allocation was carried out as fairly and equitably as possible," he said. "It was designed to evaluate customers based on their relationship with Fidelity."

Representatives of JPMorgan Chase & Co. and Goldman Sachs, the lead underwriters in the IPO, declined to say what proportion of shares were set aside for retail investors.

In IPOs, when demand exceeds supply, "The guys who get pushed out are the retail investors because the banks give priority to their biggest customers," Einhorn said.

Investors jumped into Visa after eyeing the performance of payment rival MasterCard, which has quintupled in price since its IPO two years ago. Visa's IPO shares were valued more expensively than those of MasterCard, measured relative to earnings. But market watchers say the stock has plenty of room to grow.

"Visa is a global card Goliath that ... owns one of the most recognized and respected brands in the world," Morningstar analyst Michael Kon wrote in a research note. "It is very hard to build any network, but duplicating Visa's is almost impossible."

Kon estimated Visa shares are worth $74 per share, given the size of the company's business, its market position and its growth prospects.

Big banks are getting a huge windfall from Visa. For most of its history, the company was a membership association owned by banks that issued Visa cards. Last year, it converted to a for-profit corporation and the banks became shareholders. More than $10 billion of the IPO proceeds will go to buy out part of their stakes.

JPMorgan Chase stands to collect about $1.25 billion, Bank of America will receive about $625 million and Wells Fargo about $273 million from selling shares, according to regulatory filings.

As part of the offering, Visa chief executive Joseph Saunders - who rang the opening bell on the New York Stock Exchange Wednesday morning - was awarded options to buy 831,444 Visa shares at the IPO price plus an outright stock grant of 12,025 shares. On paper, those grants were worth roughly $11 million based on a price of $56.50 per share. He is prohibited from exercising the options or selling the shares immediately but must wait until they vest, which takes place in stages over three years.

E-mail Sam Zuckerman at szuckerman@sfchronicle.com.

This article appeared on page C - 1 of the San Francisco Chronicle

Bank customers queue round the block as cash machine pays out DOUBLE their money

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Customers popping down to their Sainsbury's Local store for a few basics got in on the act - and they were soon joined by hundreds of others as they alerted family and friends to the ultimate supermarket bargain.

At one stage, the queue for the cash machine was a 100-strong - with many making multiple withdrawals in the hope they will not be traced and asked to repay the cash.

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Jackpot: Word of the fault spread quickly and more and more people began to queue outside the Sainsburys Local cashpoint

"It was really funny seeing all those people trying to get one over on the banks," said a witness.

"They were walking away with huge wads of cash and big smiles on their faces.

"They were ringing their mates and telling them to get down quickly. It makes up for all the bank charges, I guess. I hope they don't have to pay it back."

The crowd began gathering at the store in Hull at around 5pm on Tuesday and finally dispersed at 8pm when the faulty ATM ran out of notes.

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Two for one: Customers queue outside the cash machine in Hull last night which paid out twice the amount requested before running out of cash

One man, who did not wish to be named, said: "I was driving past when I saw a huge queue at the cash machine.

"I parked up and learned that it was paying out double. I joined the queue and when I finally got to the front, I drew out £200, but it gave me £400.

"The statement said I only drew out £200. I don't know whether I will have to pay it back."

Not everyone was so lucky. Taxi driver David Mellors, 37, pulled up too late and by the time he reached the front of the queue, the machine had run out of notes.

The father-of-seven said: "I was disappointed. It was the ultimate buy one, get one free sale and I missed out."

A spokesman for Sainsbury's said the cash machine was run by a private company. She declined to give the company's name and said it was unable to comment.

Asked how much money Sainsbury's believes was lost from the machine, she replied: "We do not know and we would not give out that kind of information."

She added: "It ran out of money at 8pm. The police came to see the machine and the matter is under investigation."

Most debit cards have a daily cash withdrawal limit of £300 - meaning that those lucky enough to use the haywire machine were able to take out a maximum of £600.

Whether they will get to keep it is another matter. The cash machine operator will have a record of all withdrawals made on the day.

It is then up to the discretion of the customers' banks whether or not they seek to trace each one and attempt to reclaim any overpayment.

On similar previous occasions, some banks have chosen to write off the money rather than pursue a large number of claims.

And there may be many more potential claims to be chased after unconfirmed reports suggested that other machines were also hit by the same fault.

The Sainsbury's spokesman said: "We think a number of cash machines outside supermarkets in Hull experienced similar problems."

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