MasterCard Shares Rise After Its IPO
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NEW YORK – In the biggest IPO of the year, MasterCard Incorporated shares surged in their stock market debut yesterday even though the world’s no. 2 credit-card brand originally priced below expectations.
MasterCard shares rose $5.70, or almost 15%, to $44.70 in morning trading on the New York Stock Exchange. The shares were priced at $39 each, and the initial public offering raised $2.39 billion.
The long-awaited IPO will go down as one of the market’s biggest in the past two years, eclipsing the $1.7 billion raised when Google Incorporated went public in 2004. Purchase, N.Y.-based MasterCard is now valued at about $6 billion, an amount projected to move higher as investors clamor to get a piece of one of the most venerable names in financial services.
“There seems to be enough faith in their business model for people to accumulate the stock, and investors have been very reluctant with IPOs lately,” the chief investment strategist with a New York-based investment firm that manages a $155 million portfolio, Leeb Group, Peter Dunay, said.
The size of the initial public offering came up short of the company’s original expectations as MasterCard fell victim to a volatile market and concerns over its mounting legal problems. The shares priced at $39 apiece late Wednesday – below its original forecast for a range of $40 to $43 a share.
Weighing on the price were several factors, including recent erratic market conditions that led to a lackluster IPO from Vonage Holdings Corporation on Wednesday. The country’s leading Internet phone provider’s stock fell 13% below its initial offer price.
There have also been continued concerns over MasterCard’s legal and regulatory problems. Architects of the IPO designed it as a defensive measure to shield the company from a legal assault by retailers who feel fees are too high and continued regulatory concern over antitrust issues.
Investors largely shrugged off those concerns when 61.52 million Master-Card shares – representing a 46% stake in the company – started trading under the symbol MA. Proceeds from the deal will mostly be used to redeem Class B shares, allowing the 1,400 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.
