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MoneyGram is a David and Goliath story that serves as a useful lesson in understanding what happens in the IPO market when stock prices are soaring, as they are now. The lesson is this: anything goes. So-so companies are fetching top dollar from the public, while insiders and early investors head for the exits and Acapulco. Some 125 companies are waiting their turn at this sucker's market, readying some $3 billion in stock for initial sale. A record-shattering 799 companies have sold $47 billion in stock through IPOs this year...
...this year, but money transfers are on the rise. It has 16% of the worldwide nonbank consumer-money-transfer market. But Western Union, the granddaddy of the wire business, claims 81% of the market. "Our big concern is Western Union's dominance," says Travis Farr, analyst at IPO research firm Renaissance Capital. But market dominance is only the start of what should concern would-be MoneyGram investors. A lot of savvy folks have looked at buying the company and, for whatever reason, said, "No thanks...
...least of those is MoneyGram's parent, First Data Corp., a big credit card-processing outfit that is the selling shareholder in the IPO. Last year First Data bought another data grinder, First Financial Management Corp., which just happened to own Western Union. The Federal Trade Commission took one look at the MoneyGram-Western Union union and said, Uh-uh. First Data would have to choose one and sell the other...
...dropped it," says Tom Dingledy, spokesman for drug-store chain Revco D.S. Another defector, Greyhound Lines, struck a deal with, you guessed it, Western Union. Could MoneyGram carve out a niche and survive? Sure. But what are the odds it will really flourish? And at the proposed IPO price of $16 a share, or 21 times earnings, it isn't even cheap. But then, who's asking? In this roaring market, few indeed. Next up: the Brooklyn Bridge...
...heady days after Netscape's ballistic IPO last summer--the stock shot from $27 to $71 during its first day of trading--Barksdale preached humility in the company's cramped halls. "I have a rule," he explains. "You can't talk about the stock price internally. We're not going to get focused on paper worth. We're going to keep building products." So the sandy-haired CEO was surprised to discover that his assistant had set up an electronic stock ticker in his office. "I said, 'Did you think I was kidding? Take that away!'" Barksdale recalls, laughing...