First Data IPO: Big, but not as big as hoped

First Data IPO

First Data knows how to go big. Handling nearly half of all card transactions in the U.S., it is a major force. All totaled, the company provides services for six million business locations and 4,000 financial institutions in 118 countries.

The payment-processing giant made more big news this fall. October 15, 2015, First Data began trading on the New York Stock Exchange under the symbol of FDC, and the First Data IPO began the biggest in 2015.

IPO refers to the first time a company publicly sells shares of its stock on the open market, better known as “going public.” IPOs are often initiated by smaller young companies looking for capital to expand, but First Data is anything but small or young. First Data‘s need for an IPO has different origins.

In 2007, First Data went through a leveraged buyout that went badly. The company was pressured by large interest payments just as the Great Recession hit. Coupled with growing competition with lower fees and better service, the timing couldn’t have been worse. What followed were several years of annual revenue losses.

In 2013, First Data hired Frank Bisignano as CEO, who is credited with turning the company around. Part of his focus has been on offering small merchants the same high-tech analytical tools that larger corporations had access to. This is the kind of thinking that allows us to use a credit card to pay for a taxi when not too long ago, they only took cash.

In July of 2015, First Data filed documents with the SEC announcing the intention to reenter the stock market and use the money to pay off the lingering debt from the leveraged buyout. With interest rates still low and the rumors that the Fed might raise rates at the end of the year, the time was right for the First Data IPO.

While an IPO can be a major boost to growth for a company thanks to the infusion of cash, investors may see the shares as risky because of the limited history behind them. Add that to the past few years of problems, and the it’s easy to see why the IPO was less than First Data had hoped.

Still it remains the largest IPO by far for 2015 and most analysts see the company as a turnaround success.  With the First Data IPO just happening, it remains to be seen how the strategy will affect First Data or the industry as a whole.

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