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Banking, finance, and taxes

Wal-Mart Keeps Ownership in Prepaid Credit Cards (GDOT, WMT)

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By Jon C. Ogg Updated Published
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Green Dot Corporation (NYSE: GDOT) has been one of the better performers of the IPO Class of 2010.  Its line of prepaid credit cards has grown significantly and the company had grown enough that the share sale at the IPO was effectively a partial cash-out by the backers.  The company had a secondary offering already that we referred to as ‘good dilution’ here in this case.

The lock-up agreement with underwriters for the other company insiders to not sell shares expired on January 17, 2011.  Guess which giant retailer was a big pre-IPO investor in Green Dot.  Wal-Mart Stores, Inc. (NYSE: WMT) took a stake in the prepaid credit card seller and Green Dot distributes its cards at Wal-Mart.   The company holds 2,208,552 shares of common stock, which comes to a 15% stake.

It is not uncommon for insiders and pre-IPO backers to continue to hold shares of companies they have invested in long after they were required to by contract.  If (or when) a recession comes back to haunt us, Green Dot would be expected to win along with Wal-Mart as credit tightens and as the consumers have to start going back to Wal-Mart because they have to save money again.

For now, Wal-Mart is still a large holder of Green Dot with that 2.2 million share stake that it acquired last June.  Green Dot is the exclusive provider of Walmart MoneyCards and that agreement was extended to May 2015.  Wal-Mart won’t likely sell the shares until it needs leverage on Green Dot.

JON C. OGG

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About the Author Jon C. Ogg →

Jon Ogg has been a financial news analyst since 1997. Mr. Ogg set up one of the first audio squawk box services for traders called TTN, which he sold in 2003. He has previously worked as a licensed broker to some of the top U.S. and E.U. financial institutions, managed capital, and has raised private capital at the seed and venture stage. He has lived in Copenhagen, Denmark, as well as New York and Chicago, and he now lives in Houston, Texas. Jon received a Bachelor of Business Administration in finance at University of Houston in 1992. www.247wallst.com.

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