Bill-Presentment Companies See Stocks Soar
CheckFree Holdings Corp., Norcross, GA, announced in mid-February that it will acquire rival TransPoint for about $1 billion, sending CheckFree's stock up nearly 50 percent to more than $105 before it settled back down to just under $88 on Feb. 29, an increase of more than 42 percent over its trading price at the start of the month.
CheckFree, which offers solutions for electronic bill payment and presentment, would become by far the dominant player in the electronic bill-presentment niche, which is expected to reach 25 million consumers by 2003, according to some analysts.
"The advantages are pretty clear," said Brook Newcomb, a senior analyst at Forrester Research, Cambridge, MA. "CheckFree and TransPoint had been competing with each other for large customers. It was either one or the other."
In addition to its market dominance in a booming segment, the combined companies' ownership status might have helped sway investors, Newcomb said. TransPoint is partly owned by Microsoft, First Data Corp. and Citigroup, which will end up with a combined minority interest in CheckFree.
On the negative side of the deal, Newcomb pointed out, electronic billing is still in its early stages and other players, especially banks, are seeking to establish a foothold.
"The question becomes, where will consumers go to either view or pay their bills," he said. The No. 2 company in the online bill-presentment category is Spectrum, which was formed by banking and credit card concerns Chase Manhattan, First Union and Wells Fargo.
Some analysts also have speculated that the CheckFree-TransPoint merger could be nullified by federal antitrust regulators.
Meanwhile, Group 1 Software Inc., Lanham, MD, also has seen its stock soar to new heights recently. The small software maker's stock was up more than 82 percent for the month, closing at $30-3/8 on Feb. 29. David Peikin, a company spokesman, attributed the climb to the fact that investors only recently seem to have taken serious notice of the company, which makes a product called DOC 1 that allows its clients to create customized marketing messages on their printed bill statements, among other software packages.
Peikin also said the company's recent stock rise might have been attributable to the news that it would implement a 3-for-2 stock split, which was scheduled to become effective today. In addition, Peikin said, the company is preparing some major announcements in the e-commerce arena this summer.
Newcomb, the Forrester analyst, said some questions remain about the use of bill presentment as a marketing tool, however. One drawback, he noted, was that people who are dipping into their bank accounts to pay off their debts might be placed in a frugal state of mind and thus be less inclined to spend more money.