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MasterCard to Go Public
The world’s second largest credit card company has decided to go public. MasterCard, currently owned by its 1,400 member banks, has decided to take itself to the market to raise some money, and the stock will trade openly on some exchange (NYSE one would think). After half a century as a private entity, the question is why now? And the answer appears to be litigation.
The new structure and governance will confuse some, but MasterCard has said explained:
Under the new corporate governance and ownership structure, MasterCard's current shareholders, approximately 1,400 financial institutions worldwide, are expected to retain a 41% equity interest in MasterCard Incorporated through their ownership of non-voting Class B common stock. In addition, existing shareholders will receive Class M common stock that will have no economic rights but will provide them with certain rights, including the right to elect several directors from financial institutions around the world.
MasterCard also intends to issue shares of voting Class A common stock to public investors through an initial public offering. Upon successful completion of the offering, these public investors will hold shares representing an expected 49% of the company's equity and 83% of its voting rights. Additional shares of Class A common stock, representing an expected 10% of the company's equity and the remainder of its voting rights, will be issued to a new MasterCard charitable foundation.
Before going any further, three cheers for the charitable foundation. However, one is skeptical as to why Class M stock is needed to put people on the board who should be elected through Class A stockholders’ assent. The Class B non-voting stock is less objectionable, but MasterCard probably would have done better to stick with one class of stock. That was, however, most unlikely from the beginning as the 1,400 member banks and financial institutions were not going to give up more than they had to give.
But why give up anything? The Supreme Court last year ruled that MasterCard and Visa broke anti-trust regulations, and American Express and Discover are suing for damages. The IPO, according to a MasterCard statement, “will place us in position to defend our interests in the legal and regulatory arena.” About $650 million worth of defense according to some experts. All the same, MasterCard will be jumping into an IPO only because it stands to be pushed later.
© Copyright 2005 by The Kensington Review, J. Myhre, Editor. No part of this publication may be reproduced without written consent.
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