Calpian Inc., a Dallas-based lender to independent sales organizations, is turning to the investor community to raise money so it can complete more deals.
Calpian this week became a publicly traded company under the CLPI:OB ticker symbol. The move will provide Calpian with additional cash to conduct more deals, Harold Montgomery, Calpian CEO, tells ISO&Agent Weekly.
“This is a continuation of our strategy in a very difficulty environment,” Montgomery says.
Under Calpian’s traditional model, ISOs sell a portion or their entire merchant portfolio to the ISO lender in exchange for cash. That model remains, but now Calpian will have access to more capital to conduct more and larger deals, Montgomery says.
Though many merchant portfolios are profitable, ISOs often face challenges securing financing from traditional bank lenders because their portfolios are not fixed assets. That creates opportunities for nonbank financiers, such as Calpian.
ISOs looking for additional capital also have to contend with a weak economy and increasing regulatory pressure, Montgomery says. “There are limited strategic liquidity options for ISOs at this time because of the weak economy, potential regulatory involvement and the lack of financing,” he says.
Calpian’s access to the investor community can help overcome these obstacles, and it is an efficient way to tap into investor affinity for payments companies, Montgomery says.
“The public market has proved its love for the payments business, even in a down economy,” he says.
In the year Montgomery and other Calpian executives spent working on the new company, Montgomery says the shareholder community gave a “positive” reception to the concept of another payments-company investment option.
And investors may indeed look to Calpian and other payment companies for some earnings, says Robert Dodd, analyst at Memphis, Tenn.-based Morgan Keegan & Co. But investors may not find the same kind of shelter they might have years earlier.
“In the past, in prior recessions, the earnings and valuations of payment processors had been fairly defensive,” Dodd tells ISO&Agent Weekly. But now the payments industry finds itself contending with increasing regulatory oversight and a much more mature credit and debit card market, he says.
“The end markets aren’t growing as fast as they once were, and there are a lot of worries about regulation,” Dodd says, referring to consumer payment card usage.
Still, investors continue to go after payment companies. “They’re still relatively healthy businesses that carry pretty good valuations,” Dodd says. “They’re just not quite as resistant to the downturn as in prior recessions.”