Cardtronics Slims Down Its IPO But Gets the Deal Done in Stormy Market

Cardtronics Inc., operator of the nation's largest non-bank ATM network, completed its initial public offering of stock on Monday and began trading Tuesday on the NASDAQ stock market, but only after cutting the size of the deal in a stormy stock market. Houston-based Cardtronics announced its planned IPO in September. The company planned to sell 8.33 million shares and hoped to get $14 to $16 per share, according to an amended prospectus Cardtronics filed in late November with the Securities and Exchange Commission. That would have grossed about $125 million before underwriting and other expenses. Current owners also planned to sell another 8.34 million shares, with those proceeds going to them rather than the company. Instead, Cardtronics priced its offering yesterday at $10 per share and increased the number of company-held shares sold to 12 million. To help get the deal done, existing shareholders held back on their own planned sales, though they can sell 1.8 million shares to the underwriters under an over-allotment option. The deal netted the company $110.1 million, which Cardtronics will use to pay down debt. Cardtronics chief financial officer J. Chris Brewster tells Digital Transactions News that he can't talk about the IPO because the company is still in an SEC-mandated quiet period. But observers say the scaled-back IPO is likely the result of stock-market turmoil originating with problems in the subprime mortgage market coupled with investors' concerns about the ATM market. The Federal Reserve's new payments report says ATM withdrawal transactions are decreasing at an annualized rate of 0.4% (Digital Transactions News, Dec. 10). In mid-day trading, Cardtronics shares were trading at $8.86. “This whole space, ATM deployments, is not exactly the most robust,” says Paul Tomasofsky, a former executive with the NYCE EFT network who is now president of Montvale, N.J.-based Two Sparrows Consulting LLC. Despite its smaller size, the IPO still cuts Cardtronics' indebtedness, freeing up capital for future expansion and business improvements. The company, which bought 7-Eleven Inc.'s 5,500 ATMs this year, operates 28,600 ATMs in the U.S., another 1,900 in the United Kingdom, and about 1,000 in Mexico. Cardtronics' IPO is one of the last deals of an extremely busy year on Wall Street for payment companies. Several processors, including market leader First Data Corp. and Ceridian Corp., owner of fast-growing Comdata Corp., went private. Others, such as eFunds Corp. and CheckFree Corp., were bought out. Banking firm Marshall & Ilsley Corp. spun off Metavante Corp., and Synovus Financial Corp. plans to do the same with its majority-owned processor, Total System Services Inc., by month's end. Meanwhile, Morgan Stanley spun off Discover Financial Services Inc. as an independent company. Pending deals include Visa Inc.'s IPO, expected next year, and the planned $6.7 billion buyout of Alliance Data Systems Inc. by a private-equity firm by Dec. 31. The Wall Street Journal reported on Friday that the SEC may be investigating November trades of Alliance Data shares by a hedge fund.