Shares of MasterCard leap 18% on first day

BUSINESS DIGEST

May 26, 2006|By BLOOMBERG NEWS

NEW YORK -- Shares of MasterCard Inc., whose initial public offering raised less than its backers had hoped, soared 18 percent in the first day of trading.

MasterCard surged $7 yesterday to close at $46 on the New York Stock Exchange. The world's No. 2 credit-card company raised $2.39 billion Wednesday in its IPO and priced its shares at $39 each, a dollar less than its minimum forecast.

"We've seen some choppiness in the market in the last few weeks, and ultimately the market decides what a company is worth," Robert Selander, chief executive officer of MasterCard, said in an interview. "So we decided we'd go with a price where the market said it should be."

The market for IPOs, which has been running at its fastest pace in six years, stumbled Wednesday when shares of Vonage Holdings Corp., the money-losing Internet phone company, dropped nearly 13 percent. It was the worst debut for an initial share sale in six months, and Vonage shares fell an additional 12 percent yesterday.

CMC Markets PLC, a London-based foreign-exchange broker, and Alsea SA, which owns the Mexican franchise rights for Domino's Pizza, postponed their offerings yesterday because of falling equity markets.

MasterCard's offering of 61.5 million shares, equal to 46 percent of its stock, raised 16 percent less than company executives and advisers hoped when it was completed Wednesday night.

The underwriters included Goldman Sachs Group Inc., Citigroup Inc., HSBC Holdings PLC and JPMorgan Chase & Co. They could opt to sell an additional 4.6 million shares, according to the prospectus.

Michael Duvally, spokesman at Goldman Sachs, declined to comment on the offer price.

MasterCard and Visa, the No. 1 credit-card company, collect fees from merchants on every transaction that moves through their networks. MasterCard provides services to almost 25,000 financial institutions and has about 4,400 employees. In 2005, MasterCard processed 13.7 billion transactions, the company said in a regulatory filing. Gross dollar volume climbed 13 percent to $1.7 trillion.

Visa is owned by 21,000 member financial institutions worldwide and employs 6,000 people, according to its Web site. It's the only remaining global private credit-card association. Worldwide sales are more than $3.4 trillion. Visa said it processes more than 100 million transactions per day.

Before the IPO, MasterCard had also been owned by financial institutions.

"The way MasterCard chooses to operate its network and operate its brand could be altered by going public," said David Robertson, president of Nilson Report, which tracks the credit-card industry. "They will be less beholden to financial institutions that are card issuers and more beholden to investors looking for a return."

MasterCard's IPO is the first for a major credit-card company since Capital One Financial Corp. in 1994.

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