Prepaid debit card firm Green Dot prices IPO
Green Dot Corp., the leading provider of reloadable prepaid debit cards, has been living up to the hype surrounding its initial public stock offering this week.
The Monrovia-based company priced its IPO at $36 a share late Wednesday, above the expected range of $32 to $35. The stock will begin trading on Thursday under the ticker symbol GDOT.
On Monday the size of the deal was raised from a planned 3.85 million shares to 4.17 million. On Wednesday, the offering was boosted again: The company’s brokerage underwriters said the final tally of shares sold was 4.56 million.
But all of the $164 million raised will go to current shareholders, including company managers, who are cashing out some of their stakes, according to the prospectus for the IPO. Green Dot itself isn’t raising capital in the offering.
The 11-year-old company’s growth has been explosive. Revenue in the fiscal year ended in July 2009 jumped to $235 million, up 40% from $168 million in 2008. Earnings allocated to common shareholders totaled $8.16 million in fiscal 2009, more than double the $3.68 million of the previous year.
First-quarter revenue this year surged to nearly $93 million, up 53% from a year earlier.
The credit crisis actually has been good news for Green Dot because the firm targets the tens of millions of Americans who are un-banked or under-banked.
IPO researcher Renaissance Capital noted in its recent profile of the company:
With many Americans frustrated by overdraft fees on checking accounts or lacking sufficient cash to open bank accounts, a Green Dot card offers an alternative that still allows customers to avoid using cash for day-to-day purchases, shop online, reserve hotel rooms, and control budgets. Customers can purchase and load Green Dot's prepaid cards at 50,000 retail outlets such as Wal-Mart and Walgreens, use them anywhere major credit cards are accepted, reload them with cash at a retail location or via direct deposit and withdraw cash at ATMs. The cards generally cost $4.95 to purchase or reload and users pay $5.95 per month to maintain the card.
Prepaid cards also may have a competitive advantage over normal debit cards, thanks to rule changes in the financial-reform bill that President Obama signed into law this week.
Not surprisingly, however, a market as good as the prepaid-card business is bound to attract more players, as Green Dot notes in its prospectus. And the biggest distributor of the company’s cards, Wal-Mart, just renegotiated its contract with the company, on less-favorable terms for Green Dot than before.
As a result of that new contract Wal-Mart also took a stake in the company amounting to about 5% -- a deal that will have to be expensed over the next five years, reducing Green Dot’s net earnings.
Still, as a debt-free, fast-growth company with low capital spending needs, Green Dot’s story has natural appeal on Wall Street. And as IPOs from Tesla Motors Inc., Qlik Technologies and RealD Inc. have shown in recent weeks, good stories have gotten big first-day pops.
-- Tom Petruno