FDC

Publicly traded companies mentioned herein: First Data (FDC)

Highlights

The presenter is short shares of merchant acquirer and payment processor First Data on the broad thesis that the company competes in a highly commoditized space with increasingly unfavorable economics. He noted that of the 2% processing fee typically charged on credit card transactions, the issuing bank gets 1.75% of it while networks including Visa and MasterCard get 20 basis points, leaving only 5 or so bps to the payment processor. Additionally, when large merchants push back on the rate they are paying, typically it is the merchant processor in this value chain that gets squeezed. Most importantly, however, the presenter highlighted his concerns over the company’s ability to economically refinance its high cost debt coming due in the near future.