Mastercard's Shares Drop and CEO, Ajay Banga Moves to Become Executive Chairman

Following the credit card company, Mastercard’s revelation on Monday, Feb. 24, 2020, that the deadly coronavirus outbreak could have an effect on its revenue for the 2020 fiscal year, its shares fell. During after-hours trading, the shares of Mastercard (MA) dropped sharply by about 3% on Monday.

After the trading bell sounded on Monday, the company issued a statement saying, “Cross-border travel, and to a lesser extent cross-border e-commerce growth, is being impacted by the Coronavirus.” The credit card company also said its revenue growth for the first quarter of 2020 will be about two to three percentage points lower than what it had previously.

The company further said, “If the impact is limited to the first quarter only, we expect that our 2020 annual year-over-year net revenue growth rate would be at the low end of the low-teens range.”

In general, the stock market was down on Monday, resulting in the worst sell-off since 2018. This sharp decline was attributed to the coronavirus outbreak. The Dow Jones Industrial Average was worst hit as its features tanked by about 1000 points. The S&P 500, Nasdaq Composite and Nasdaq 100 were not left out and as experienced some decline as well. With the pace at which the coronavirus seems to be spreading even in countries outside, there are fears a global economic slowdown may occur.

Some companies have raised alarm on the epidemic. The companies include Apple, P&G, e.t.c. Warren Buffett of Berkshire Hathaway also reacted to the decline but revealed that he was not going to sell-off his stocks.

Last month, Mastercard revealed that it was expecting great quarterly results even higher than analysts’ expectations. This, they attributed to customers spending more using its cards during the holiday shopping period.

Similarly, on Tuesday, Feb. 25, 2020, Mastercard announced that its chief executive officer, Ajay Banga will leave his positive next year and move to the position of the executive chairman of the company. Mr. Banga is expected to take over from Richard Hathornwaite, who was the CEO from May 2006 till date.

Banga will be succeeded by the company’s chief product officer, Michael Miebach, effective January 1, 2021.

In a statement, Banga said, “Miebach has as a proven track record of building products and running businesses globally. During the course of Michael’s 10 years at Mastercard, he has been a key architect of our multi-rail strategy — including leading the acquisition of Vocalink and the pending transaction with Nets — to address a broader set of payment flows.”

From the look of things, Mastercard’s executive reshuffles do not seem to be unrelated to its revenue warning that was issued on Monday.