Wednesday, August 31, 2005

MasterCard plans restructuring, IPO (MarketWatch)

MasterCard plans to go public under new ownership structure By Steve Gelsi. NEW YORK (MarketWatch)

MasterCard on Wednesday unveiled a new ownership structure and said it plans to become a publicly traded company. 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 Inc. Through their ownership of non-voting Class B common stock. MasterCard also intends to issue shares of voting Class A common stock to public investors through an initial public offering. Public investors will hold shares representing an expected 49% of the company's equity and 83% of its voting rights. (Source: MarketWatch)


[ commentary: The news of banks unloading shares in MasterCard reminds me of a case-study example from the old adage of how to invest. As the story goes, there are three types of investments for betting on new oil wells. "Type A" - a sure thing - is where you know that oil is in the ground, it is seeping out of the surface -- you are swimming in the stuff and that is where you personally invest along with your closest friends and family members. "Type B" - we'll, we're in Texas and there's just got to be oil here - is where there might be oil, but you have to drill and explore; this is where you get the neighbors and distant friends to go along. And, "Type C" - throwing darts at a map - is where you haven't a clue; that is where "investors" risk the capital. With a multi-billion dollar antitrust price-fixing class action threatening the core of MasterCard's Interchange revenue stream, what better way to hedge your investment than to charm the IPO public markets with an opportunity to own what might be a threatened business. MasterCard was always a "Type A" investment for the banks, that was until its customers caught on to the nearly one-hundred separate Interchange fees in the U.S., which are among the highest in the world. I use this oil analogy because as the nation faces record high gas prices, the credit card association members are reaping windfall profits; they typically earn a percent of the sale from every gallon pumped. Since gas prices have doubled, MasterCard and Visa also benefiting from profiteering from motorists, consumers and businesses throughout our country. As the government prepares to open the valves to our nation's strategic oil reserves to soften the effects of soaring gas price, what is MasterCard and Visa doing to help?].