MasterCard International's transition to a public company isn't likely to have much of a direct effect on its corporate card programs, but it might play well into the card provider's aim of increasing its marketshare in the corporate realm.
Shares of MasterCard began trading May 25 on the New York Stock Exchange as the company offered more than 61 million shares of common stock. MasterCard will retain $650 million in proceeds from the sale, and the rest will redeem shares held by current shareholders, according to the company.
Because of a quiet period mandated by the Securities and Exchange Commission, MasterCard executives are not yet able to comment on how the transition might affect corporate card programs. David Hillman, principal of Deerfield, Ill.-based Consulting Strategies, said any such impact probably would be slight and related to the reporting associated with being a public company.
"This would provide more information about MasterCard to companies that might be considering a MasterCard product," Hillman said. "Companies like to have financial information about the suppliers with whom they deal."
Even so, the reports won't be a major source of new information for travel managers, he said. MasterCard products are issued by banks, and the reports from the banks are more helpful tools, he said. It's not an entirely new option, either. Corporate card leader American Express and Diners Club, as a part of Citicorp, already are public companies.
Those looking at the larger picture for MasterCard, however, could have reason to be optimistic. MasterCard has been focused on upping its profile in the travel industry, and its IPO gives it a chance to continue that focus.
"As a public company that has to be responsible to its shareholders, it can focus on profits and the attractiveness of products and potentially be exploring the market for other revenue-making opportunities that might not have been there before," Hillman said. "Generally, it's going to have a positive impact on MasterCard's position in the industry."
Any results depend upon the makeup of the shareholders board, said Carol Ann Salcito, president of Norwalk, Conn.-based Management Alternatives, but she agreed with Hillman that the initial public offering was a move in the right direction.
"The only effect I can see is that there will be more stakeholders involved," according to Salcito. "This may give MasterCard an even broader perspective on its initiatives."
Analysts have said that recent merchant lawsuits directed toward interchange fees
(BTN, Aug. 15, 2005) are at the heart of the decision to go public. Both small merchants and retail giants have filed suits alleging collusive pricing of fees against Visa, MasterCard and their large U.S.-based bank issuers. Interchange fees are of interest to travel managers because they are one of the main sources of income to feed corporate card rebates.
With the IPO, the banks will have less liability in those lawsuits as MasterCard redeems the B-shares. In addition, the retained $650 million will be available to defend against the lawsuits and any regulatory action that might come as a result of them.
The move to a public company could be a form of defense in and of itself. Rob Abele, U.S. Bank's executive vice president for corporate payment services, told BTN that MasterCard would provide more transparency to its practices as a public company, and more light on the process would make it less subject to challenges, he said.