If it wasn’t the Pope, Brian Williams or John Boehner – odds are it didn’t get much in the way of news coverage last week. You might have heard that the Square IPO is happening – for real this time – in about two weeks. Samsung Pay also managed to snag some interest since it is officially going live in the U.S. today, following a strong Korean launch that has seen about $30 million in transactions processed in a relatively short period of time.
But by and large, if one wasn’t the Pontiff addressing Congress, a disgraced TV anchor slinking back on air or the Speaker of the House spectacularly dropping the mic — it was a little hard to get heard last week. You may even wonder if anything outside of those three things were worth paying attention to.
Which is why PYMNTS is here, as always, with our weekly Data Dive.
After some months of speculation, it looks like the process for First Data IPO will get rolling this week. The experts are predicting the initial public offering could net as much as $3 billion – on a valuation of $20+ billion, which would represent the biggest offering so far this year.
The IPO marks a return to the public markets for First Data, which was taken private by private equity firm KKR in 2007 for roughly $26 billion price tag. The estimated market cap for the newly public firm is expected to be between $20 billion and $25 billion. The proceeds raised from the issuance would be used to pay down the $21 billion in debt on its books.
Amid the move toward public markets, First Data is making some news – last week about its push into open source payments with the acquisition of open source storefront platform, Spree Commerce.
“We will be taking advantage of First Data’s financial and technical resources to bring the Spree technology to a worldwide audience,” Spree Commerce CEO Sean Schofield wrote in a blog post confirming the acquisition.
“First Data recognizes the important role of open source technology. They are fully supportive of our open source efforts, and the Spree project will remain open source.”
First Data’s IPO will now begin its “roadshow” phase where the firm will pitch its story and gauge interest from investors.
CEO Frank Bisignano is optimistic that the company is headed in the right direction as company revenues trend upward.
“We are pleased with our second quarter results, which showed solid constant currency revenue growth,” Bisignano noted in the firm’s most recent earnings release.
“During the quarter we further strengthened our capital structure, rolled out the Clover Mini integrated POS solution and acquired Transaction Wireless, a leading digital gift card distribution platform. We incurred $19 million in restructuring costs during the quarter to fund part of our recently announced strategic expense management initiative and remain focused on achieving our objective of $200 million in annualized savings by mid-2016.”
CEO enthusiasm aside, the First Data IPO will have to be as successful as forecast with that $20 billion-$25 billion market cap result to even “represent the beginning of a return on investment” for KKR, according to The Wall Street Journal.
KKR purchased First Data at the peak of the leveraged buyout frenzy that was, of course, followed by the financial crisis and a huge drop in consumer spending — and the credit card and debit card transactions that make up First Data’s bread and butter.
That meant swiftly declining values for the First Data business itself, and the buyout firm eventually marked down its estimation of First Data’s worth to $.60 on the dollar. Amid First Data management changes, KKR and other investors put an additional $3.5 billion into the company last year.
Revenue growth has returned to First Data over the past six quarters, and profit finally came in 2014.
If all goes according to plan, the IPO is expected to go off in mid-October. KKR is not selling any stock in the deal, WSJ reported.
The EMV clock may be ticking particularly loudly these days — with less than five days until the clock strikes liability shift — but it seems that a rather large swath of the U.S. population either can’t hear it, or just don’t care.
A few weeks ago, PYMNTS noted that as many as 78 percent of small businesses are not ready for the EMV transition (and won’t be by Oct. 1). Which, as it turns out, might be just as well, since as it turns out, 60 percent of American consumers either don’t have an EMV cards or have one, but have no earthly idea why or what it is for.
According to an ACI Worldwide survey done about a month ago, six out of 10 consumers reported either not having received their chip-enabled card or not knowing what the use or purpose of their new card is.
The new results offers a companion portrait to data released by CreditCards.com earlier this year which indicates banks have been slow to upgrade their customers’ cards.
As of February 2015, only 31 percent said they have received a new credit card that contains an embedded EMV chip.
That survey’s results also indicated that banks upgrade schedule for customer cards are heavily linked to spend and likeliness to spend. Almost half (49 percent) of high-net-worth cardholders — those with $100,000 or more in investable assets — had been issued EMV cards as of January, while only 13 percent of cardholders with incomes less than $35,000 had received the new cards.
According to the new ACI research, it seems more customers have received cards, but the number of consumers who understand why has not much moved since earlier this year. Among those consumers who have received a new card, one-third said they did not know the “real reason” for the card.
The confusion was unevenly distributed. Millennials and Gen Xers did better when it came to understanding EMV — 78 percent reported at least basic knowledge. Consumers aged 65+ showed the least awareness, with just 66 percent reporting to understand EMV or even have any idea what it is.
It does seem, however, that higher spending customers have gotten their cards – 55 percent of households with a $100,000+ income reported having received chip-enabled cards. Affluent cardholders also seemed to show a greater awareness of why their card is now chip enabled.
We’ll see how an ill-equipped and/or ill-informed consuming public impacts the cutover on Thursday.
“If consumers are unaware, the implications for retailers come October and throughout the holiday shopping season could be major, especially as retailers prepare for this new payment experience,” said Mike Braatz, senior vice president of payments risk management at ACI Worldwide. “Although October is the date for the liability shift, we know issuers, acquirers and retailers are still working on issuing cards and upgrading payment acceptance systems to address EMV.”
No one ever said e-tail is easy — a lesson Groupon has learned the hard way as it has tried to pivot from being a daily deals site to a coupon site and now into being more of a traditional e-tailer.
And with that change comes sacrifice — in this case the sacrifice of jobs, as Groupon has announced that it intends to eliminate nearly 1,100 positions within its international Deal Factory and Customer Service group over the next several months. This great paring down will come concurrent with an effort to unify the firm’s global technology platforms, tools and processes.
“We still have work to do, but our Operations teams, Engineering teams and many, many others have made amazing progress. Simply put, we are a stronger, faster Groupon today because of this work,” COO Rich Williams wrote in a blog post describing Groupon’s One Playbook.
He described the initiative as a huge undertaking, which is now forcing it to take a second look at its operations globally and make some essential cuts.
“We’re also now in a position to realize the efficiencies we’ve been working so hard to gain, to further improve the way we operate around the world and — most importantly — continue to channel more and more of our resources toward long-term growth. Practically, this means we’re taking some broad restructuring actions to better focus our resources and streamline our international operations.”
That streamlining looks like it will extend past personnel and into the markets the firm serves.
“We saw that the investment required to bring our technology, tools and marketplace to every one of our 40+ countries isn’t commensurate with the return at this point,” Williams wrote. “We believe that in order for our geographic footprint to be an even bigger advantage, we need to focus our energy and dollars on fewer countries.”
Therefore, in Morocco, Panama, The Philippines, Puerto Rico, Taiwan, Thailand and Uruguay, Groupon is about to be a thing of the past. Those closures follow exits in Turkey and Greece earlier this year and a sell-off of its controlling stake of Groupon India to Sequoia in March.
So far, however, it does not seem Groupon’s restructuring plans are cutting much ice with investors. According to The Wall Street Journal, Groupon has seen its stock price decline 8 percent since announcing the layoffs and restructuring. Groupon’s shares have also fallen below their level from when the company pushed out co-founder and then-Chief Executive Andrew Mason in early 2013.
So the moral of the story this week? First Data’s marching, Groupon’s retreating and consumers are standing still.
We’re always on the lookout for opportunities to partner with innovators and disruptors.
Learn More