[reposted May 19] If successful, the nation's largest initial public offering since Google in 2004, faces a fiscal imperilment that will chill even the most zealous of investor road shows. Extracted from the SEC filing, in MasterCard Inc's® own words:
1) "... We have not established reserves for any of the significant legal proceedings in which we are currently involved."
2) "If we are found liable in any of these lawsuits, we may, among other things, be forced to pay damages and/or change our business practices and pricing structure, which could have a material adverse effect on our revenue and profitability, or, in certain circumstances, even cause us to become insolvent, and result in a significant reduction in the value, or the complete loss, of your investment ..."
3) "If we are less successful than Visa in defending interchange fees, we could also be competitively disadvantaged against Visa."
4) "If we are ultimately unsuccessful in our defense of interchange fees, such regulation may have a material adverse impact on our revenue, our prospects for future growth, and our overall business."
What does this mean?
The Purchase, N.Y.-based credit card association faces price-fixing suits from merchant customers which represents the largest antitrust case since the AT&T breakup in the early 1980s. Yet, the company, as reported in BusinessWeek is hoping to spend 25% of the IPO proceeds to help fund the litigation. Currently, the company otherwise has no reserves budgeted.
From BusinessWeek, Dec 5: "In filings with the Securities & Exchange Commission, MasterCard says it plans to spend $650 million of the IPO proceeds on legal fees. It has no other reserves to fight this litigation, and although the banks will probably be on the hook for some of it, they're distancing themselves from the MasterCard network."
[source: WayTooHigh.com]
