Sunday , October 25, 2020

As Processor Valuations Soar, Shift4 Files for an IPO

Shift4 Payments Inc., one of the nation’s biggest independent sales organizations, announced on Tuesday that it has filed a draft registration statement with the U.S. Securities and Exchange Commission for what it calls a “proposed” public offering. A Shift4 spokesman did not immediately return a call from Digital Transactions News seeking comment on the move, but the 20-year-old, Allentown, Pa.-based company’s announcement comes as valuations for publicly held processors and ISOs are soaring, according to recently released data.

The filing has been “confidentially” submitted, according to the announcement, which adds that “the number of shares to be offered and the price range for the proposed offering have not yet been determined.” A document search late Tuesday morning on the SEC Web site did not yield a result.

Shift4 expects the IPO to start after an SEC review, “subject to market and other conditions.” But the company’s press release on the matter warns that “there is no assurance that the initial public offering will be completed.”

With the IPO, Shift4 would become the latest ISO to tap the public markets and will join a group of related companies whose shares have been climbing rapidly. One relatively recent example is Atlanta-based EVO Payments Inc., which went public in May 2018. The company, which maintains a substantial European business, boasts a valuation that is now nearly 46 times its earnings, according to the latest report from Barrington Research, released Tuesday.

Indeed, the firm’s analysis of a basket of 26 public payments-company stocks yields an overall price-to-earnings ratio of 30.1 as of Nov. 29, up from 26.5 at the end of October. The list includes companies like EVO but also card networks, processors, and technology providers.

“The group has had a fantastic run,” says Gary Prestopino, managing director at Chicago-based Barrington Research. “Valuations in the [processor] market are very generous right now. It’s an advantageous time to take a company public.”

Much of the reason for this, he adds, is tied up with the processor business model. “Investors have an appetite for high recurring-revenue businesses,” he says.

According to numbers from Shift4, the company processes more than 3.7 billion transactions annually for more than 225,000 merchants. Annual payment volume totals more than $200 billion. It maintains offices in Europe as well as the United States.

The company has had an eventful history operating under various names. It started out as United Bank Card Inc., and long maintained its headquarters in New Jersey. It first won notoriety in 2004 with an offer of free point-of-sale terminals to merchants using its services. In 2011, the company moved to Allentown and changed its name the following year to Harbortouch, taking the brand of its POS system. In 2017, it established a parent company called Lighthouse Network, which in turn became Shift4 in 2018 after the company acquired Shift4 Corp., a payment gateway based in Las Vegas.

The company, which has concentrated in the hospitality market in recent years, boasts such brands as Arby’s, Blimpie, Carrabba’s, Kentucky Fried Chicken, and Outback Steakhouse among its clients. It works with more than 300 software companies.

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