Payment processing giant First Data (FDC) raised $2.6 billion in its initial public offering, more than eight years after it was taken private by buyout firm Kohlberg Kravis Roberts & Co. (KKR). It was both the year’s largest IPO and something of a disappointment, given that First Data priced its shares at $16 each, compared to original plans to get between $18 and $20 per share. Moreover, it broke below that $16 per share price in early trading, and had returned to the lowlands at the time of this writing.
All of this comes amid broader IPO market volatility, including news that grocery giant Albertsons postponed an offering that also was expected to price this week.
Coins2Day spent some time on the phone with First Data’s chief financial officer Himanshu Patel, who was just promoted to the role last month, to get a better sense of why the company went public now and the story is told shareholders. What follows is an edited transcript of our conversation:
FORTUNE: Why do you think you broke your IPO price?
Himanshu Patel: It’s hard to tell, there are just so many possible factors. The first day is always going to be pretty volatile. I don’t think we’re too focused on the second-by-second trading.
Did you give any thoughts last night to delaying?
No, not really. We weren’t trying to be that cute with the market timing. We had a strategy with the company’s transformation and the business is feeling good. It was time to begin communicating that story to investors. We had an amazing amount of high quality investors take an interest in the stock, but we didn’t have a gun to our heads. We’ll have paid back more than $6 billion in debt with the IPO and last year’s private placement, and we can refinance more of it soon.
The lower share price means you raised more than $400 million less than you had anticipated. Does that change where the money will go?
The vast majority of the proceeds were being used to pay off the debt, and that’s still the plan. From our perspective, there wasn’t going to be a lot going to general purposes anyway.
During the road show, what did you hear most often from prospective investors?
Unlike most IPOs, First Data is a pretty well known company to the public markets. We were always a public filer with the SEC because we had public debt, and we had been publicly-traded before. So people had lots of opinions about us before hearing anything from us.
I think people were surprised in a major way on two items. First was our improvement in revenue. The company has historically struggled growing its top line, so our growth — plus our material new growth initiatives on top of that — I think was a very pleasant surprise even to investors who think they know the company very well.
The second thing I think really captivated people is the balance sheet opportunity. We have $10 billion in debt that we can refinance between now and May 2016, with an average coupon of 10%. And our borrowing costs today in the market are considerably lower than that.
Are you concerned that your lack of a first-day “pop” will upset First Data’s rank and file?
No, I wouldn’t say that. I think people understood that this was a pretty choppy IPO market.
Another company in the payments space, Square, filed for an IPO yesterday. Any thoughts on it?
I haven’t actually looked at the filing, but I’ve seen some highlights. We have a very different business model, but do respect all of our competitors. One thing I think is unique about First Data is that we have thousands of salespeople and partners selling our products, so we feel good not just about inventing new products bu commercializing them as well.
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