MasterCard and Vonage IPOs: Quick Previews (MA, VG)

Includes: MA, VG
by: Jon Ogg

This week we have two major IPO's coming to market. One is MasterCard and one is Vonage. There is strong demand so far for both companies as both are said to be oversubscribed, and our recommendation for the other four of five companies on the IPO docket next week is this: "Come public on a different day than both MasterCard and Vonage if you want any free publicity that day."

Master Card (NYSE:MA) has scheduled a 61.5+ million share IPO with a range of $40.00 to $43.00, with a pricing set for Wednesday night and trading Thursday. MasterCard is of course one of the leading providers of credit and debit card services for thousands of financial institutions and name guarantor of the credit cards under the same name. According to all discussions it looks the only thing that may prevent this coming in at the high-end of the range (or above) or with a higher number of shares is a serious market slide between now and the IPO date.

The underwriting group is massive: Goldman Sachs is the Lead Manager; Joint Book-Runners are Citigroup, HSBC, J.P.Morgan; and the co-managers are Bear Stearns, Cowen & Co., Deutsche Bank, Harris Nesbitt, KeyBanc Capital, and Santander Investment. The IPO will raise over $2.4 Billion and the implied market cap will be right at $5.6 Billion.

With this almost a week away and our crystal ball in the repair shop, we can't automatically give you a Cramer "buy, buy, buy!". But, in a static world without seeing what the markets will do in the three trading sessions before the pricing we would say that if you can get any shares allocated at the IPO price it would be worth taking a shot at. Chances are that the institutions will get the lion's share as normal, and there will be too many financial-related funds and firms that will need to own the name.

The cost of reading about the IPO online at a dozen websites: $0.00;
The time-cost required to call your broker and hearing "Yeah right, I bet you want shares!": $3.50;
The cost of sending your broker's manager game tickets in hopes of getting shares: $200.00;
Actually getting an allocation at the IPO-price: Priceless.........

[More Seeking Alpha coverage of the Mastercard IPO]

We should get a pricing of Vonage (NYSE:VG) on Tuesday night for Wednesday trading, and they are slated to price 31.25 Million shares at an indicated range of $16.00 to $18.00 per share. Vonage is the leading voice-over-IP (VoIP) telephony company in the US. It also has a significant underwriting group: the book-runners are Citigroup, Deutsche Bank, and UBS; and the co-managers are Bear Stearns, Piper Jaffray, and Thomas Weisel.

The pre-demand is also said to be there for the IPO at the deal's pricing level, but the aftermarket trading is the stumper here. No one knows yet if this will open close to the pricing and run higher or if it will gap up too high with a guillotine delivery to those with "market buy on open" orders. It is said to be oversubscribed, but let's see how the tech sector holds up before making any brave calls. At the indicated range, it is slated to sell over $500 Million in stock and will have an implied market cap of approximately $2.8 Billion. The financial ratios will be clearer when we see actual indicative price estimates on Monday and Tuesday, so stay tuned for more.

[More Seeking Alpha coverage of the Vonage IPO]

We will offer valuation comparisons as these IPO's get closer and have had a chance to compare them to their public and private peers. Have a great weekend.