Green Dot Shares Jump Following 5-Year Walmart Renewal (June 23, 2015)
Green Dot Corp. and Walmart have recommitted to their fruitful relationship for another five years, and though the companies are mum on the details of their revenue-sharing arrangement, the deal enhances the outlook for the iconic financial services provider. Green Dot shares rose more than 40 percent today, following last night’s announcement of the agreement.
Green Dot will continue as program manager and issuing bank for Walmart’s MoneyCard products, and Walmart will continue carrying Green Dot cards through May 1, 2020, at least, extending a partnership that began in 2007. The agreement replaces a contract that was set to expire this year, ending some uncertainty for the Pasadena, Calif.-based financial services company. Walmart MoneyCard accounted for 29 percent of the company’s revenue during the first quarter of this year, Green Dot said during an analyst conference last month. Overall, Walmart accounts for about half of Green Dot’s annual revenue, from the program management and issuing relationship and the retailer’s distribution of various financial services products, including GoBank, which is exclusively distributed at Walmart stores. Green Dot will continue to share revenue for its prepaid cards with Walmart, but, for the first time, Green Dot didn’t disclose the details of the revenue-sharing arrangement. Green Dot also said it will return $150 million to shareholders under a new share repurchase program, marking its first stock buyback, another factor contributing to the stock uptick.
Analysts say the deal is good news for Green Dot. “We believe the contract gives both sides incentive to continue promoting the card[s],” said Larry Berlin, a vice president with Chicago-based First Analysis, in a research note sent today to investors. Green Dot still faces plenty of challenges, Berlin noted, including competition within Walmart’s aisles from other prepaid card providers, including American Express Corp.’s Serve. One concern is the long-term effects of Green Dot’s discontinuation within the last year of its MoneyPak reload packs in favor of swipe reloads, Berlin added. Green Dot CEO Steve Streit last month told analysts Green Dot was likely to lose “a large amount of business” from the MoneyPak shift.
- Green Dot Launches GoBank Checking Account Exclusively at Walmart
- Green Dot: GoBank Deposits, Spending Surged in Q4
- Green Dot MoneyPak PIN Product Out of Market by Q1 2015