Payments giant First Data priced its IPO tonight at $16 per share, beneath the expected range of $18 to $20, according to Bloomberg. Selling 160 million shares, the payments-processing company will raise $2.56 billion in its flotation, making it the largest IPO of the year.
The pricing news comes directly on the heels of Square, a competing payments company, which revealed its IPO filing after the bell. It seems that the larger processing sector expects investor appetite for payment technology companies.
This is not First Data’s first shot as a public company. Private equity firm KKR took a big bet on First Data in 2007, buying it for $29 billion in a leveraged buyout. Today, First Data — which will trade under the ticket FDC on the New York Stock Exchange — will command a market value of just $14 billion.
The company has slowly expanding revenues and steep debt. At current tip, the company has an unadjusted total load of $21.16 billion. First Data will be using the $2.56 billion proceeds from the initial public offering to pay down some of its long-term debt.
According to the same document, the company anticipated to end its IPO with cash and equivalents of $325 million, based on an anticipated $19 per-share pricing. Given that the firm’s $16 per-share final offering price is substantially lower than expected, the company will likely be unable to lower its debt load as much as it previously anticipated.
First Data’s debt load is a material drag on its profitability. In the first half of 2015, the company had interest expenses of $813 million. The company reported an aggregate net loss for the same two quarters of $138 million. In short, if First Data weren’t in such massive debt, it would likely be turning a tidy profit. In the hock as deep as it is, the company is having a hard time managing both its obligations and profitability.
Debt aside, First Data’s scale is notable. The firm had $5.56 billion in revenue during the first half of 2015, which puts it on a path to revenue in the 11 figures this year.
While some investors are skeptical of First Data’s financials, others see this as a growth opportunity.
“They’ve not been able to turn a profit yet, which may give the market pause, particularly in light of the recent volatility,” said Brian Hamilton, CEO of Sageworks. “But if they stay cautious on the valuation and keep their sales multiple below 5x, I think this could be a good opportunity.”
Your email address will not be published. Required fields are marked *
Royal Savings Bank, Chicago, Illinois, Acquires the Insured Deposits of Washington Federal Bank for Savings, Chicago, Illinois
Awards for SIFFCY 2017 Announced
MARKS & SPENCER LAUNCHES CLOTHES EXCHANGE IN INDIA
SIFFCY alliance with Amazon Prime Video
Shabab Sabri, Sandeep Batra, Swati Sharma, Arjunna Harjaie, Vickey Prasad, Architect Shashi Prabhu visited 1st day of Borivali Design Fest
2014 The Global Indian New Network (TGINN)