Why sell the goose if it still laying golden eggs? We are of course talking about the upcoming MasterCard IPO.
Credit card issuer MasterCard Inc. plans to price its IPO between $40 and $43 a share when it sells a $2.8 billion stake in the company later this month.
A total of 61.5 million shares of Class A common stock, or 46% of the company's stock, is slated for the initial public offering some time in the fourth week of May. If there is sufficient demand, an additional 4.6 million shares will be sold in an over-allotment tranche, according to an updated prospectus filed by the company Wednesday.
If MasterCard succeeds at pricing its deal at the high end of its range, the Purchase, N.Y., company would be valued at $5.8 billion.
All but $650 million of the money raised in the IPO will be used to buy a portion of the Class B common stock stakes held by current owners of the closely held cooperative, who are members or affiliates of MasterCard's credit card network. About 30% of the proceeds will go to members and affiliates who are also underwriting the deal - including Wall Street underwriters JP Morgan Chase & Co. (JPM) and Citigroup Inc. (C). The remaining $650 million will be used to increase the company's capital, defend it in legal and regulatory proceedings, and for other general corporate purposes.
The deal, which is being lead-managed by Goldman Sachs Group Inc. (GS), will trade under the symbol MA on the New York Stock Exchange.
So insiders are bailing via IPO to the public. There are lots of potential reasons for this.
1) Rising default rates
2) Rising bankruptcies
3) Fear of what a Democratic Congress might do to the bankruptcy law
4) Fear of what a Democratic Congress might do to maximum allowed card rates
Just like home builders bailing on their own companies in mass, if insiders want out, it is generally bad business to want in.
