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Mastercard's "IPO"
Old 12-25-2005, 09:50 AM   #1
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Mastercard's "IPO"

Usually a company attempts to retain some form of control after an IPO. Despite getting an obscenely large amount of cash (and in some cases just cashing out), the founders still want to run the business despite giving up an equity stake.

But few are as cynical about it as Mastercard's IPO plans.

Briefly, one aspect of the IPO is a charity funded by MC. They even say that funding it will ensure that they'll lose money next year. However the reason for creating this charity, er, other than to do good works, is "creating a big shareholder with a vested interest in the company's long-term success." Hmmm... if they want that then why is MC going public? Oh, yeah, I remember-- the obscene amounts of cash.

A second aspect of the IPO is the interests of the member banks. "The 1,400 banks that own MasterCard will also be issued Class M common stock, which gives them veto power over 'significant corporate transactions,' including any change that would allow anyone to control 15 percent or more of MasterCard's stock." Hmmm... isn't an IPO supposed to sell shares to individual shareholders? So why do one in the first place? Oh, yeah, I remember.

I think MC is approaching this IPO like Google. As the 800-pound gorilla in their sector they feel that they can get away with dictating terms, and most institutional investors probably feel obligated to buy into a stock that will inevitably join the indexes. Secondary concerns like growth, profits, & cash flow are ignored for the franchise & brand cachet.

Aftermarket IPOs to retail investors are generally losers. This one seems to be even more of a loser than a conventional IPO. Anyone here have an opinion based on the IPO's fundamentals, or is this truly MC throwing a "King Kong"?

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