Discover Financial Shares Debut on the Downside

Shares of Discover Financial Services declined Monday, as the credit card network debuted as an independent publicly-traded company after its spin-off from Morgan Stanley.

Morgan Stanley announced in December it would spin off Discover Financial Services to allow the investment bank to focus on its trading and money-management segments. Under the terms of the deal, each shareholder gets one Discover share for every two Morgan Stanley shares.

The spin-off of Discover, the smallest of the four major credit card networks, follows MasterCard's initial public offering last May. Visa also started the process for its own IPO in June. American Express is publicly traded on the New York Stock Exchange.

Discover shares began trading on a "when-issued" basis on June 14, meaning the trades are settled when the stock is officially issued. The when-issued shares debuted at $26, climbed above $32, and then pulled back to $29.60 by Friday.

Although analysts note that IPOs tend to perform differently than spinoffs, investors will inevitably draw comparisons between Discover's opening and MasterCard's debut in May 2006. MasterCard shares, which have since surged 325%, jumped 18% in their first day of trading over the IPO price of $39 per share.

	Price		Change	%Change
MA		---

Analysts have so far differed on the company's prospects. Keefe Bruyette, for one, initiated coverage of Discover on Friday with a "market perform" rating and a 12-month price target of $30. Thomas Weisel Partners gave the company an "overweight" rating and a price target of $34.

An analyst at Calyon Securities, on the other hand, initiated coverage of Discover with a "sell" rating and a 12-month price target of $24.

Some analysts had expected Discover shares to fall initially and rise in the long term.

Over the past year, Discover pulled in $4.3 billion in revenue, the highest results in company history.

Discover shares are listed on the New York Stock Exchange under the symbol "DFS."