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The First Data stock price opened at $16.32 a share today (Thursday), just above its IPO price of $16.
Last night, the First Data IPO priced 16% below the midpoint of its $18 to $20 range at $16. Pricing below the IPO range is disappointing for new stocks because it shows demand may be weak.
By opening at $16.32, IPO investors saw an immediate gain of 2% when FDC stock hit the market this morning. As of 1:05 p.m., FDC stock trades at $16.05, up 0.3% from its $16 offer price.
The deal raised $2.6 billion, making it the largest IPO of 2015. It's the third billion-dollar IPO this year after Tallgrass Energy GP LP's (NYSE: TEGP) $1.2 billion deal and Columbia Pipeline Partners LP's (NYSE: CPPL) $1.1 billion debut.
First Data Corp. (NYSE: FDC) provides e-commerce and payment processing to banks and financial institutions. The electronic payment company processes trillions of dollars in credit and debit card transactions for large and small businesses.
Today's performance for the First Data stock price is just the latest disappointment from the IPO market. In fact, the First Data stock price could even settle below its $16 offer price.
With 2015 IPOs averaging a 3.5% decline from their offer price, the IPO market is exceptionally volatile right now. Many large deals, including Albertsons Companies' $1.6 billion IPO, have been delayed due to the uncertainty.
And that's not the only problem for the First Data stock. You see, there are two more unpredictable factors that could threaten the First Data stock price over the long term…
Two Biggest Influences on the First Data Stock Price (NYSE: FDC)
Since the company processes credit card payments, consumer spending levels will influence how the First Data stock price performs down the road.
Luckily for the company, U.S. consumer spending is soaring this year. Back in May, spending rose 0.9%, the largest increase in nearly six years. August saw an increase of 0.4% despite market volatility later in the month.
The success of the First Data stock price will be closely tied to this consumer spending number moving forward. Slowing growth could negatively impact the First Data stock price.
The second influence will be the state of the e-commerce industry.
"The market for our electronic commerce services is evolving and may not continue to develop or grow rapidly enough for us to maintain and increase our profitability," the filing stated. "If consumers or businesses do not continue to adopt our services, it could have a material adverse effect on our business."
While First Data is profitable, it has only generated positive returns in one quarter. It posted $12 million in earnings for Q4 2014, the first profitable quarter in seven years.
Considering recent IPO volatility and the unpredictable e-commerce market, we recommend avoiding FDC stock for now. It's best to let the company prove it's worth your investment.
The only way it can do that is through impressive earnings reports. You'll want to see if their revenue and net profits start to grow over the course of a few quarters.
"IPO hype is based on what 'could be,' not what 'is,'" Money Morning Chief Investment Strategist Keith Fitz-Gerald said. "Many times management cannot make the jump, and you do not want to pay the price for finding out which is which."
By waiting, you'll also avoid much of the early volatility that's common in the IPO market.
There's A Lot More Where First Data Came From… First Data is just one of several huge IPOs set to hit the stock market over the next few months. One of them could raise more than every deal in July and August combined. Here are the five most anticipated IPOs to watch in the fourth quarter…