NEW YORK – MasterCard Corp.'s bid to become a public company got off to a shaky start yesterday after the world's No. 2 credit-card brand priced its stock below expectations, falling victim to volatile market conditions and concerns over its mounting legal problems.
The Purchase, N.Y.-based credit card association's stock will begin trading today on the New York Stock Exchange with an initial public offering price of $39 – below the $40 to $43 range it originally expected.
The $2.39 billion offering will go down as one of the largest in two years, eclipsing the $1.7 billion raised when Google Inc. went public in 2004.
Weighing on the price were several factors. One was a recent erratic market that led to a lackluster IPO from Vonage Holdings Corp. yesterday. The country's leading Internet phone provider's stock fell almost 13 percent below its initial offering price.
But what might be the main culprit is investor concern over MasterCard's legal and regulatory problems. Architects of the IPO designed the flotation as a defensive move to shield it from a legal assault by retailers who think fees are too high, and continued regulatory concern over antitrust issues.
However, the chance to own one of the world's top financial services brands is still expected to lure investors, especially since the stock price is within easy reach of even the smallest investors.
Some 61.52 million shares – representing a 46 percent stake in the company – will begin trading today under the symbol MA.
The deal values MasterCard – which is owned by its 1,400 member banks – at almost $6 billion.
Proceeds from the deal will mostly be used to redeem Class B shares, allowing the banks that make up MasterCard's association to begin unwinding their stakes. MasterCard will also use about $650 million raised in the public flotation to fund a war chest to protect itself from legal troubles.
MasterCard and larger rival Visa International face ongoing legal battles over what are known as interchange fees, which retailers pay the associations to process credit and debit card transactions. Merchant groups have already filed a class-action suit alleging unlawful price fixing of fees that hurt both merchants and consumers.
In addition, both MasterCard and Visa have been sued by American Express Co. and Discover Financial Services, the credit card division of Morgan Stanley, for anticompetitive practices that blocked member banks from issuing cards on their rival networks.
The company recently posted a $126.7 million profit for the quarter ending March 31, up almost 36 percent from the year-earlier period, according to a filing with the Securities and Exchange Commission.
