Several executives of the prepaid industry speculated last week at the Prepaid Card Expo in Las Vegas that an established player in the rapidly growing field soon would be ready to go public. That happened sooner than expected — on Friday Green Dot Corp. announced plans for an initial public offering that could raise as much as $150 million.
The move could put the Monrovia, Calif., prepaid card company in a good position to make acquisitions, said Gil Luria, an analyst with Wedbush Securities in Los Angeles. "A lot of times when a market leader in an emerging category goes public, it's to see if they can use the capital they raise in the IPO to grow even faster."
Luria said that Green Dot would likely be able to reach its $150 million goal, because the market is showing more stability than in early 2009, when many companies pushed back plans to go public. "If a company wants to raise money and it feels this is the right time, it's not surprising that they proceed right now," he said.
Green Dot said in a filing Friday with the Securities and Exchange Commission that it had agreed to acquire a bank holding company and its subsidiary commercial bank, but it did not say when, if ever, it expects to complete the deal. It did not name the seller.
Kenneth Goins, the chief executive of Green Dot rival Prepaid Solutions Inc., expect consolidation among prepaid card companies in the next few years. "We're starting to get a lot of players," he said. "People are starting to bump into each other at" conferences, and they start talking, which could lead to consolidation. Goins said several companies, which he would not name, could be ready for an IPO.
Green Dot did not give an initial stock price in its filing.
Though Green Dot generated $234.8 million in revenue and net income of $37.2 million for its fiscal year that ended July 31, it warned that growth might slow. It said continued growth depends on its ability to "attract new users of our products, to expand our reload network and to increase our revenues per customer," it said in the filing.
Green Dot is well set up for future growth as the credit card industry struggles to adapt to the Credit Card Accountability, Responsibility and Disclosure Act, according to Brian Riley, a research director in the bank cards practice at TowerGroup in Needham, Mass.
"As the credit card industry toils with adapting to the CARD Act and debit card issuers contend with barriers on their [nonsufficient funds] fees, the prepaid industry will certainly benefit by its ability to provide a market-driven solution for cardholders," Riley said.
Green Dot's IPO also would benefit other industry players, because SEC reporting requirements would force the company to open up some of its financials, Riley said. "The industry will [have] a deeper understanding of the revenue dynamics," he said.