Green Dot completed an IPO this summer. Its shares found a price of approximately $34 per share. Since then, Green Dot shares have been on a roll. Today they are trading at a range between $53 and $54.
The IPO will not dilute the value of existing shares. The company says it expects to generate about $100 million
from the shares, but that all will come from ones that are currently held by the company's private owners.
Green Dot's first IPO had the same arrangement. Even after that, the majority of Green Dot shares were owned by insiders.
Green Dot reported an EPS of 30 cents in the last quarter. That still means that their shares have a very generous multiple. When Green Dot says that it expects to increase gross dollar volume (loads and spends) by 80 percent in the coming 12 months, which they did promise, the news is already baked into the price.
Bank Talk has emphasized how the new rules on interchange pricing create an opportunity for prepaid debit card providers. Green Dot said it had $27 million in interchange revenues in Q3. That is a lot when you consider that card revenue is only $40.6 million.
One possibility that remains to be seen is how consumers will experience the impact of the interchange legislation. Rush Card sought to get an exemption for prepaid cards, and it was successful. The result is that retailers will pay a lower interchange fee when consumers pull out their credit and bank-issued debit cards. The caveat is that a card issued by a financial institution with less than $10 billion in assets will not be impacted. The credit unions, all but a few of which fall below $10 billion in assets, actually fought against the language that exempted most of their members. But, going back to the debit card market, it means that most prepaid cards will have higher interchange rates. The prepaid card providers and their bank partners could gain from that, because they all share in the interchange proceeds.
What remains to be seen is how retailers will react. The credit unions insist that retailers will punish their cards at the checkout, either by refusing to take the cards, by adding an additional charge to the transaction for the use of the card, or by some other means, all of which would create a second-class status for users. Wal-Mart, a partner of Green Dot and an active force in lobbying for the lower fees, seems unlikely to grant Green Dot a special carve-out in their stores.