Green Dot Faces Investor Suit Over Revised Earnings Forecast

Sometimes even being upfront about market conditions can land a company in potential hot water.

In a press release distributed Aug. 1, the law offices of Howard G. Smith, representing investors of Green Dot Corp., announced the filing of a lawsuit in U.S. District Court for the Central District of California on behalf of all purchasers of Green Dot securities between Jan. 26 and July 26 this year. The suit seeks class-action status.

The complaint alleges violations of federal securities laws against Green Dot and some of its executive officers stemming from the company's July 26 announcement lowering its yearend revenue forecast.

Green Dot informed investors at the time that merchants that previously offered Green Dot's prepaid cards exclusively plan to offer competing cards as well. Shortly after the announcement, Green Dot's stock price plummeted.

"Throughout the class period, the defendants made false and/or misleading statements, as well as failed to disclose material adverse facts about Green Dot's business, operations and prospects," the law firm alleges in its press release.

The complaint contends the defendants made false or misleading statements or failed to disclose that the company's new internal risk policies and procedures were negatively impacting Green Dot's growth in new-account activations, and that certain retailers were planning to start selling competing general purpose reloadable cards in addition to Green Dot's, according to the release.

It also alleges Green Dot lacked historical data to predict accurately how other retailers' sales of competing products would impact Green Dot's sales and that the defendants' positive statements about Green Dot's business, operations and prospects, and those regarding Green Dot's revenue outlook for the 2012 fiscal year were unreasonable, the release notes.

Green Dot spokesperson Liz Brady said the company would decline to comment.