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NetSpend Drops IPO Plans

Adam Rust's picture

Posted October 14, 2010

NetSpend will not go forward with an initial public offering of 18.5 million shares of its stock. NetSpend's struggles point to regulatory problems with their card issuance partner, MetaBank.

They had hoped to fetch between $10 and $12 per share for the prepaid card company.

On Tuesday evening, the OTS issues a Supervisory Directive to MetaBank. It required MetaBank to cease both its refund anticipation loan business and its i-advance line of credit. MetaBank is the bank partner for most of NetSpend's cards and the sole source of funding for the i-advance product.

Management at NetSpend claimed that there would be no impact to their profits. That's hard to believe. For one, NetSpend owns 4.9 percent of MetaBank. MetaBank's stock has taken a big hit, falling about 30 percent in the last 24 hours, and it stands to reason that MetaBank is about to lose a lot of its projected revenue. That's only one of several clear points where NetSpend is going to suffer because of this situation. Right off the bat, there is the fee revenue that had been coming to NetSpend because of the i-advance.

Cardholders are charged fees associated with additional products and services offered in conjunction with certain of our GPR cards, including MetaBank's iAdvance (TM) line of credit, overdraft protection through our issuing banks, a variety of bill payment options, and card-to-card transfers of funds through our customer service.

Seems pretty hard to miss the message here. This is from the s-1.

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