ashville, Tenn.-based iPayment, Inc.'s (Nasdaq: IPMT) stock was well received by investors on May 12, 2003 for its initial public offering after a brief postponement because of a slip-up by Bear Stearns, iPayment's IPO underwriter. iPayment's public offering was the first after two straight months of no IPOs in the U.S, the slowest IPO market in this country in nearly 30 years.

The debut of iPayment shares closed at $21.02 - a $5, or 31.4%, jump over its $16 offering price, with 6,532,700 shares trading hands.

In December 2002, iPayment filed S-1 documents with the Securities and Exchange Commission for an initial public offering of stock to take place in early 2003. The IPO was scheduled for May 9, 2003, with Bear Stearns Cos. serving as the underwriter on the deal, valued at $68 million.

However, Bear Stearns delayed the IPO by one day after one of its senior analysts, James Kissane, promoted it in an investor "road show" on the Web; the delay gave iPayment officials time to disclose the incident. On April 28, 10 Wall Street securities firms, including Bear Stearns, had agreed in a $1.4 billion settlement to prohibit stock research analysts from partaking in IPO "Company- or Investment Banking-sponsored road shows." Bear Stearns is paying $80 million of that settlement.

Since the IPO craze of the late 1990s, securities regulators have begun looking into any abuse of investors by investment companies, and many see the April 28 settlement as another step forward on Wall Street.

Although the new regulations will not take effect until a few more months, the "road show" blunder was an uncomfortable situation for Bear Stearns. The company has since apologized and agreed to implement the regulations immediately.

The Green Sheet featured iPayment in the top 25 of the 2002 Billion Dollar Bank Card Acquiring Report (GSQ Vol. 6, No. 1, January 2003). The company processes credit and debit card payments for small to medium-size merchants in the U.S., providing them with such services as card authorization, data capture, settlement, risk management, fraud detection and merchant assistance and support.

iPayment services approximately 56,000 merchants that generate $250,000 or less of charge volume per year with average transactions around $75 (as of December 31, 2002). Many of iPayment's merchants accept credit card payments over the phone and the Internet.

On April 23, iPayment reported net income of $900,000 for the first quarter of 2003 on revenue of $46.7 million, compared to a loss of $700,000 on revenue of $16.5 million for the same period last year; operating expenses increased to $42.1 million from $15.8 million. Most of the increased revenue and operating expense came from acquisitions.

For its IPO, iPayment originally offered 4.5 million shares at $16 per share (before underwriting discounts and commissions) but then increased the offering another 500,000 shares after a showing of strong demand, for a total offering of 5 million shares.

The company raised $80 million and said it intends to use $46 million of the net proceeds from the offering to repay some of the $78 million it owes in outstanding debts; it will use $5 million for working capital and the remainder for general corporate purposes, including more potential acquisitions.

The company was founded in 1992. Since its incorporation in 2001 - following funding by venture capital firm Summit Partners of Palo Alto, Calif. - iPayment has acquired six merchant credit card servicing companies, four portfolios and several smaller portfolios of merchant accounts.

In August 2002, iPayment tried to buy Humboldt Bancorp's proprietary merchant processing operation for $34 million in cash, but the deal did not go through.

iPayment is still in a quiet period because of the IPO, and company officials said they were unable to comment on the IPO for this story.