Green Dot Secondary, Maybe 'Good Dilution' (GDOT)

Green Dot Corporation (NYSE: GDOT) has been one of the better IPO outcomes for 2010. It was just on July 21, 2010 that the prepaid credit card company sold 4.6 million shares at $36.00 per share.  That was above a 4.2 million share offering first noted and above the $32 to $35 per share price target.  What was odd was that it was all executives and insiders who sold shares ate the IPO and none of the IPO proceeds went to the company itself.  Now the company has filed for a secondary offering.  That was fast, extremely fast.

The public secondary offering will consist of another 4,269,051 shares of common stock.  As in the IPO, all shares are being sold by existing holders and none of the proceeds will end up in Green Dot’s coffers.

J.P. Morgan and Morgan Stanley will act as joint book-running managers for the offering, and the group will have a 30-day overallotment option to purchase up to an additional 426,904 shares of common stock from the shareholders.

Green Dot has never traded anywhere close to its IPO pricing.  The post-IPO range this year was $47.01 to $59.80, and the stock closed at $59.71 today.

The after-hours reaction has shares trading down almost 3% around $58.00.  This is one of those drops that might feel like a win considering that it is close to a doubling of the float.

Perhaps the explanation is as simple as this sort of dilution is actually ‘good dilution’ if you can say that.  One issue around the stock is that the free float of shares is actually just too small for any investors to get really get their hands on.  The average volume is only about 70,000 shares per day.  Maybe this offering will allow Green Dot’s free float and average share volume to more adequately reflect how it has performed.

JON C. OGG