Recession Watch: Green Dot IPO… Prepaid Debit Cards

This week brought about an interesting initial public offering filing from a company called Green Dot Corporation.  If you are looking for a beneficiary of hard times and a world where credit gets harder and harder to obtain, this may be it.  Green Dot offers reloadable prepaid debit cards.  The company did not offer financial terms for the IPO but listed that it would sell up to $150 million in common stock for filing purposes.  It also did not offer a designated stock ticker which its shares will trade under but the company did note that its shares will list on the New York Stock Exchange.   J.P. Morgan and Morgan Stanley are listed as the joint book-runners and co-managers of the offering are listed as Piper Jaffray and UBS.

Green Dot is a prepaid financial services company which provides general purpose reloadable prepaid debit cards in the United States.  The company believes that the Green Dot Network is the leading prepaid reload network in the United States as it sells cards and offers reload services nationwide at about 50,000 retail stores.  Its proprietary technology platform is called Green PlaNET and enables real-time transactions in a secure environment. The cards are designed for general spending purposes and can be used anywhere the cards’ applicable payment network, such as Visa or MasterCard, is accepted.  These cards differ from gift cards in that they can be reloaded with additional funds.

As of October 31, 2009, it has 2.4 million active cards in its portfolio.  Its distribution and marketing relationships include Walmart, Walgreens, CVS, Rite Aid, Kroger, Radio Shack, K-Mart, Meijer and 7-Eleven. Green Dot also counts over 100 third-party programs that use its nationwide reload network to facilitate reloading by their cardholders and it recently entered into an agreement with PayPal so customers can add funds to any new or existing PayPal account through its reload network.

In fiscal 2009, the gross dollar volume loaded to its GPR card and reload products was $4.7 billion, an increase of 66% over fiscal 2008.  Revenues are as follows with a July 31 year-end date:

• 2007 operating revenues were $83.6 million and operating income was $1,2 million
• 2008 operating revenues were $168.1 million and operating income was $29.2 million
• 2009 operating revenues were $234.8 million and operating income was $63.7 million

In the three months ended October 31, 2009 its total operating revenue was $66.3 million and its operating income was $17.9 million.

Celebrating prepaid debit cards… long live the recession.

JON C. OGG