Cardtronics's IPO Fell Short of Expectations

Implications: Choppy markets may have led to Cardtronics shares falling more than 10% in its IPO debut on 12.11.07. Shares fell as low as $8.33 a share and never made it pass its $10 per share offering on 12.11.07. Based on the reduced size and price of its IPO, Cardtronics market cap is approximately $385 million. Although existing shareholders held back on their own plans to sell their stock to get the deal done, they can sell 1.8 million shares to the underwriters under an over allotment option. Cardtronics has led the ISO (Independent Sales Organizations) market with over 31,500 off-premise ATMs, in addition to branding contracts with major banks and retailers and the recent acquisition of 7-Eleven's fleet of 5,500 ATMs. The acquisition cost Cardtronics more than $135 million. All of this growth has resulted in Cardtronics racking up debt to service and maintain their fleet of machines. Its IPO will help Cardtronics pay off debt and set aside a portion of the funds to upgrade their ATM fleet.

Analysis: Cardtronics launched its IPO on 12.11.07 without much fanfare and a drop in share price. Despite the reduction in the size and price of its IPO, Cardtronics will reduce its debt and plans to focus on growing operations in the U.S. off-premise market, Mexico and the U.K. Cardtronics is the largest global ATM operator in the world and also plans to expand operations in the U.K., due to the demand for ATMs and growth in the region.

1.  Cardtronics hopes to reverse the trends in the ATM ISO (Independent Sales Organizations) market of consolidations, sell-offs, decline in ATM ownership, financial loss, shrinking transaction volumes and surcharge revenue with its IPO and the acquisition of 7-Eleven's ATM fleet of 5,500 ATMs, which may significantly increase per ATM transaction volumes, market share, surcharge revenue and branding opportunities

2.  7-Eleven owns and operates the largest C-stores (Convenient Stores) and provides financial services via its VCom financial services kiosks for a large portion of the 80 million unbanked/underserved consumers who may lack a bank account and/or banking relationship and who may prefer to conduct financial services at their local C-store. The VCom machines which Cardtronics acquired from 7-Eleven will offer consumers the ability to make cash withdrawals, purchase prepaid cards, top-up mobile phones, cash their payroll checks and send money via Western Union Services

Takeaway:  In the U.S., ATM ISOs account for over 260,000 of the 415,000+ ATMs deployed in the U.S. Cardtronics is positioning itself to take advantage of growth in the U.S., Mexico and the U.K. The U.K. is experiencing accelerated growth and over 68% of all ATMs are deployed off-premise in the region. Cardtronics plans to use its Bank Machine Limited operations in the U.K. to drive growth with off-premise ATM deployments. Off-premise ATMs which are driven by ATM ISOs are expected to rise as banks seek new locations to extend their reach and maximize their surcharge revenue.