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