iPayment Floats IPO, Rises Past Controversy

Amid one of the most difficult initial public offering markets in decades, iPayment jumped into equity markets Monday to raise over $46 million with an IPO that was dogged by controversy regarding its underwriter Bear Stearns.

The offering, the first IPO in over two months and the first Internet-related offering this year, was delayed over
revelations that a Bear Stearns analyst had touted the stock in an online roadshow that came barely two weeks after Wall Street firms agreed to a $1.4
billion settlement with regulators. The settlement is aimed at ending conflicting practices involving analysts that promote stocks for which the analyst’s firm is conducting investment banking services.

On Monday, The Wall Street Journal reported that Bear Stearns analyst James Kissane promoted the offering last week during a Webcast “net”
roadshow, a practice that is now forbidden
under the settlement between government regulators and Wall Street firms.

But after a delay in its debut while regulators looked into the matter, and following an apology by Bear Stearns, the Nashville-based company, which provides credit and
debit card-based payment processing services to small merchants, came to
market at $16 per share. It closed at $21 on the day — a rise of
31 percent.

iPayment said it would use the $46.1 million it raised to pay off debt,
with $5 million earmarked for working capital, and the remainder for general
corporate purposes, including potential acquisitions.

The company said that, as of the end of December, it has helped process
credit card and debit card payments for about 56,000 active small merchants
across the U.S., including both traditional card-present, or “swipe,”
transactions, as well as card-not-present transactions, such as transactions
over the Internet or by mail, fax or telephone.

The company makes a business serving smaller merchants whose average
credit card volume of less than $250,000 a year requires them to pay higher
transaction fees in order to receive payment services from larger payment processors.

Despite the controversy regarding Bear Stearns, investors stepped up to
buy iPayment shares Monday, bidding up its price after trading began in the
early afternoon. The IPO came almost a week after another expected
tech-related IPO, DigitalNet, decided to postpone its offering, which had
been slated for last week.

The Bear Stearns’ apology over an analyst that apparently flouted a
landmark conflict of interest settlement was not the only reminder of the
conflict-of-interest charges leveled against Wall Street firms by regulators
in the wake of the dot-com bust.

Also on Monday, famed technology investment banker Frank Quattrone,
formerly of Credit Suisse First Boston, was indicted by a federal grand jury
on charges of obstructing justice. The indictment accuses Quattrone, who led
the IPOs of many technology and dot-com shares in the late 1990s bubble, of
trying to get co-workers to destroy potential evidence regarding alleged IPO
abuses after the firm knew of federal investigations.

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