Green Dot Corp.'s initial public offering will be a major milestone for the prepaid card market regardless of the company's ability to reach its recently disclosed price targets.
Existing investors, including Green Dot Chief Executive Steve Streit and other early financial backers, plan to sell up to 3.85 million shares in the Monrovia, Calif., company's IPO at an expected range of $32 to $35, Green Dot disclosed Friday in a Securities and Exchange Commission filing.
In an unusual move, the company will not retain any proceeds from the IPO because only secondary shares held by current investors will be sold.
The deal signals that the prepaid card is a "product that is here to stay and has tremendous growth opportunities globally," said Brian Riley, the research director for the bank cards service at TowerGroup in Needham, Mass. "Creating a public entity in the prepaid card market will really open up some of the numbers that a lot of the people in the industry have estimated for so long."
Green Dot, which has grown rapidly since its founding in 1999, thanks in large part to its partnership with Wal-Mart Stores Inc., announced in February that it would go public.
Initially the company planned to raise up to $150 million in the offering, which it said it would use to fund business operations and acquisitions.
However, Green Dot announced a financing deal in June with Wal-Mart that observers said would provide significant working capital, making it less important that it raise funds through the stock offering.
In a June 29 SEC filing Green Dot announced that no new shares would be issued in its IPO and it would not earn any of the proceeds from the sale.
Analysts at the time said the decision to only offer secondary shares in an IPO is unusual and can signal a company's lack of confidence in its ability to raise capital. But in Green Dot's case, they noted that the move likely is more indicative of its healthy balance sheet; continuing with the IPO would create a market for the shares and enable the company to sell stock at a later time.
While only current stockholders are selling, Green Dot's latest filing shows company insiders are not planning to unload all their holdings.
For instance, Streit is offering 542,690 shares owned through a family trust, but will still hold 4.43 million shares, or 12.6%, of Green Dot's class B stock. TTP Fund LP, which is managed by the Atlanta venture capital firm Total Technology Ventures LLC, is offering 675,000 shares but will still own 3.43 million, or 10%, of the company's class B stock.
The venture capital firm Sequoia Capital in Menlo Park, Calif., which owns 12.1 million class B shares, is not selling any stock, according to the filing.
Streit did not respond to inquiries Friday, and Green Dot spokeswoman LB Baer declined to comment on the most recent filing.
Riley said going public also gives industry watchers a better picture of Green Dot's relationship with Wal-Mart, which accounts for the lion's share of the company's sales.
Last month Green Dot issued 2.21 million shares to Wal-Mart as part of the extension of a business agreement with the Bentonville, Ark., retailer. The shares vest over five years and represent less than 1% of the total voting power of its stock.
Green Dot provides Wal-Mart's reloadable prepaid MoneyCard, which is issued by GE Money Bank, a subsidiary of General Electric Co.
Sales at Wal-Mart accounted for 63% of Green Dot's operating revenue in the first quarter, according to SEC filings.
In Friday's filing, Green Dot said preliminary results show its second-quarter operating revenue would be between $86.5 million and $90.5 million, up from $62.9 million a year earlier.
The company's stock will be listed on the New York Stock Exchange under the symbol GDOT. JPMorgan Chase & Co., Morgan Stanley, Deutsche Bank Securities, Piper Jaffray & Co. and UBS Securities LLC are underwriting the IPO.
