The Green Sheet Online Edition
June 23, 2008 • Issue 08:06:02
MasterCard IPO soaring
The results are in. At the company's annual stockholders meeting on June 3, 2008, MasterCard Worldwide President and Chief Executive Officer Robert W. Selander boasted a stock increase of 661 percent since MasterCard's initial public offering (IPO) in May 2006. Class A common stock shares of the Purchase, N.Y.-based company soared from $39 to $297.10 as of June 9, 2008, with a 52-week high of $320.30.
Selander noted that the fundamentals of the company's business are strong. "There continues to be great opportunity for growth in the payments industry as consumers and businesses are increasingly embracing the ease, speed and security of electronic payments. As the payments revolution continues, MasterCard is committed to offering solutions that drive greater choice and convenience for all of our constituents."
Keeping it together
While many companies opt to split stock when prices hit triple digits - to make it more appealing to the smaller shareholders - Selander ruled out such a move because the company has two classes of stock, and 34 percent of its stock is not publicly owned.
Class A stock represents 66 percent of the equity ownership held by public investors. Class B common stock, which represents 34 percent of the equity interest in the company, carries no voting rights and represents the ownership retained by MasterCard's financial institution customers at the time of the IPO.
Selander believes these factors, along with costs incurred from initiating a stock split, led management and the board of directors to conclude it was an inappropriate time to do so.
Strength in numbers
MasterCard consistently reports strong earnings as consumers continue to shift from cash and checks to credit and debit cards. The company's gross dollar volume, a measure of charges on cards, grew an average of 16.1 percent over the past three years. Total revenues generated in 2007 were $4.068 billion, a 22.3 percent increase from $3.3 billion the previous year.
Processed transactions surged by an average of 16.8 percent to $18.7 billion, and net revenues by 17.6 percent annually. Net income totaled $1.086 billion for 2007, or $7.58 per share, compared with $457 million, or $3.37 per share, in 2006.
Moreover, according to company representatives, MasterCard's long-term performance objectives project an average annual net revenue growth of 12 to 15 percent and a net income growth of 20 to 30 percent.
Business beyond borders
Although the U.S. economy has slowed and American consumers have cut back on spending, MasterCard continues to see double-digit rates of growth outside the United States. "The good news is that outside the U.S., we have a lot of healthy economies," Selander said. "Since over half our revenues are abroad, that gives us a level of balance and growth that most domestically focused companies won't realize in this environment."
According to the 2008 MasterCard Worldwide Centers of Commerce Index, an annual research initiative designed to evaluate and rank how major cities compare in performing critical functions that connect markets and commerce globally, London remains the most influential city. However, cities in Asia and Eastern Europe, especially Shanghai, China, and Moscow, represent the fastest rising regions within the index.
Other emerging markets considered key growth areas for the near future include India, Brazil and Poland. Further confirming the importance of Asia, South America and Europe on the world economic stage, the study marked the displacement of Los Angeles from the top 10, leaving New York and Chicago as the only remaining North American cities in the upper echelon.
Over the past 40 years, MasterCard evolved from an association of member banks to a worldwide Securities and Exchange Commission-registered company. The company recognized that a new governance structure and public ownership would place it in a more competitive position.
The number of MasterCard employees increased from 4,600 to 5,000 in 2007. Key growth drivers for future geographic and technologic expansion include replacement of cash and checks, increased usage, acceptance and processing of electronic payments, and advisory services.
In a letter published in the report, MasterCard Chairman Richard Haythornthwaite said, "From our 2006 transition to a publicly traded company, to our leadership position in new payment solutions like MasterCard PayPass, MasterCard is a driving force in the payments revolution, and will continue to deliver increased value to our customers and merchant partners."
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