You are now subscribed
Your newsletter sign-up was successful
Want to add more newsletters?
Delivered daily
Kiplinger Today
Profit and prosper with the best of Kiplinger's advice on investing, taxes, retirement, personal finance and much more delivered daily. Smart money moves start here.
Sent five days a week
Kiplinger A Step Ahead
Get practical help to make better financial decisions in your everyday life, from spending to savings on top deals.
Delivered daily
Kiplinger Closing Bell
Get today's biggest financial and investing headlines delivered to your inbox every day the U.S. stock market is open.
Sent twice a week
Kiplinger Adviser Intel
Financial pros across the country share best practices and fresh tactics to preserve and grow your wealth.
Delivered weekly
Kiplinger Tax Tips
Trim your federal and state tax bills with practical tax-planning and tax-cutting strategies.
Sent twice a week
Kiplinger Retirement Tips
Your twice-a-week guide to planning and enjoying a financially secure and richly rewarding retirement
Sent bimonthly.
Kiplinger Adviser Angle
Insights for advisers, wealth managers and other financial professionals.
Sent twice a week
Kiplinger Investing Weekly
Your twice-a-week roundup of promising stocks, funds, companies and industries you should consider, ones you should avoid, and why.
Sent weekly for six weeks
Kiplinger Invest for Retirement
Your step-by-step six-part series on how to invest for retirement, from devising a successful strategy to exactly which investments to choose.
Money raised by MasterCard’s May 25 initial public offering: $2.4 billion. Reduced risk of legal liability through stock sale: Priceless. Just like the commercials, that may overstate the case. But in the view of some analysts, the decision to go public could insulate MasterCard from charges leveled by disgruntled merchants.
The Purchase, N.Y., company confronts antitrust lawsuits from merchants angry over rising fees they must pay when customers whip out their MasterCards. Morgan Keegan analyst Robert Dodd estimates that the company’s liability from litigation could amount to $3.7 billion after taxes, or about $26 a share. Craig Maurer, an analyst with Fulcrum Research, cautions that "unfavorable rulings could permanently lower revenues and profitability." Neither analyst expects the legal issues to be resolved this year.
MasterCard is the middleman between 750 million branded credit and debit cards and the 24 million locations that accept them. The company authorizes, clears and settles transactions on its proprietary payment network. In a typical $100 transaction, MasterCard keeps 10 cents, the bank that issued the card keeps $1.50 and the merchant receives $98, Maurer estimates. MasterCard generates revenue primarily from these fees.
From just $107.88 $24.99 for Kiplinger Personal Finance
Become a smarter, better informed investor. Subscribe from just $107.88 $24.99, plus get up to 4 Special Issues
Sign up for Kiplinger’s Free Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
But merchants who accept MasterCard are unhappy. Many feel that the banks and MasterCard, which set the price for the payment network, have colluded against them. Selling shares to the public enables MasterCard to "distance itself from (collusion) allegations," Maurer says. After the IPO, public shareholders own 46% of the company, banks control 44% and the MasterCard Foundation holds 10%.
The legal cloud over MasterCard has not dampened investor enthusiasm for its stock (symbol MA). The shares opened at $39, climbed to as high as $46.74 and closed Tuesday at $44. The stock trades at 15 times the $2.77 per share that Dodd and Maurer, on average, expect MasterCard to earn this year. Despite the risk of serious courtroom drama, Dodd rates the stock an "outperform" and Maurer calls shares a "buy." MasterCard should benefit as the world shifts from paper checks to plastic cards, they say.
MasterCard runs second to its larger rival, Visa, in most markets. But Maurer expects the number of dollars that flow through MasterCard’s network to increase by at least 12% this year and next.
--Thomas M. Anderson
-
Dow Leads in Mixed Session on Amgen Earnings: Stock Market TodayThe rest of Wall Street struggled as Advanced Micro Devices earnings caused a chip-stock sell-off.
-
How to Watch the 2026 Winter Olympics Without OverpayingHere’s how to stream the 2026 Winter Olympics live, including low-cost viewing options, Peacock access and ways to catch your favorite athletes and events from anywhere.
-
Here’s How to Stream the Super Bowl for LessWe'll show you the least expensive ways to stream football's biggest event.
-
If You'd Put $1,000 Into AMD Stock 20 Years Ago, Here's What You'd Have TodayAdvanced Micro Devices stock is soaring thanks to AI, but as a buy-and-hold bet, it's been a market laggard.
-
If You'd Put $1,000 Into UPS Stock 20 Years Ago, Here's What You'd Have TodayUnited Parcel Service stock has been a massive long-term laggard.
-
How the Stock Market Performed in the First Year of Trump's Second TermSix months after President Donald Trump's inauguration, take a look at how the stock market has performed.
-
Visa Stamps the Dow's 398-Point Slide: Stock Market TodayIt's as clear as ever that President Donald Trump and his administration can't (or won't) keep their hands off financial markets.
-
If You'd Put $1,000 Into Lowe's Stock 20 Years Ago, Here's What You'd Have TodayLowe's stock has delivered disappointing returns recently, but it's been a great holding for truly patient investors.
-
If You'd Put $1,000 Into 3M Stock 20 Years Ago, Here's What You'd Have TodayMMM stock has been a pit of despair for truly long-term shareholders.
-
If You'd Put $1,000 Into Coca-Cola Stock 20 Years Ago, Here's What You'd Have TodayEven with its reliable dividend growth and generous stock buybacks, Coca-Cola has underperformed the broad market in the long term.
-
If You Put $1,000 into Qualcomm Stock 20 Years Ago, Here's What You Would Have TodayQualcomm stock has been a big disappointment for truly long-term investors.
