Green Dot Faces Investor Suit Following Stock Slide

Two stockholders frustrated by Green Dot's recent stock slide have filed a lawsuit against that the prepaid card company, claiming that it failed to disclose material information about the competitive landscape and the potential impact on its business.

Green Dot's share plummeted 60% in late July after it lowered earnings guidance for the year on news that its retail partners will soon start offering competitors' prepaid cards. The stock has rebounded slightly over the past month, but still remains at about half of its previous value before the announcement. It was trading at $11.09 late Tuesday.

In the months leading up to the guidance change, the Monrovia, Calif., company "made false and/or misleading statements, as well as failed to disclose material facts about the company's business, operations, and prospects" that led to significant shareholder losses, says a July 27 complaint filed by Brian Zee. A related complaint was filed by investor Hung Diep on Aug. 10.

The lawsuit names Green Dot, Chief Executive Steve Streit and Chief Financial Officer John Keatley as defendants.

The plaintiffs argue that the company didn't make public concerns about increasing competition at retail locations or about new internal risk policies that were having a negative effect on account growth. The case, which seeks class-action status, is on behalf of those who purchased Green Dot securities between Jan. 26 and July 26.

"Had Plaintiff and the other members of the Class and the marketplace known the truth regarding the problems that Green Dot was experiencing, which were not disclosed by Defendants, Plaintiff and other members of the Class would not have purchased or otherwise acquired their Green Dot securities, or, if they had acquired such securities during the Class Period, they would not have done so at the artificially inflated prices which they paid," the complaint adds.

Zee and Diep are represented by several plaintiffs' firms, including Glancy Binkow & Goldberg LLP, Saxena White P.A. and the law offices of Howard G. Smith. The lawsuit, filed in the U.S. District Court for the Central District of California, asks the court for unspecified compensatory damages for the proposed class and reimbursement of reasonable legal costs.

A spokeswoman for Green Dot said the company would not comment. The company has not yet filed a response in the case.