A notorious prison gang is lamenting Green Dot Corp.’s decision to discontinue its MoneyPak prepaid card last year. And the Pasadena company’s shareholders are, too.
On a recent conference call discussing the company’s fourth-quarter earnings, Green Dot Chief Executive Steven Streit estimated that getting rid of MoneyPak could cost the company between $10 million and $40 million in revenue as well as between $2 million and $10 million in earnings before interest, taxes, depreciation and amortization, or Ebitda. And despite adequate quarterly financials, that guidance had investors seeing red.
Shares of Green Dot plummeted 25 percent to close at $14.71 during the week ended Feb. 4, making it one of the biggest losers on the LABJ Stock Index. (See Page 30.)
Green Dot reported fourth-quarter revenue of $153 million and adjusted net income of $8.3 million (16 cents a share), compared with $145 million and $8.3 million (18 cents) for the same period a year earlier. Those results were just under analysts’ estimates of $154 million in revenue and profits of 17 cents a share.
But the big news was the company’s window into life without MoneyPak.
MoneyPak was a kind of prepaid deposit certificate, sold at retailers such as Wal-Mart Stores Inc., on which customers were able to load between $20 and $500 in cash. Money could then be transferred – completely anonymously – to a prepaid debit card through Green Dot’s website or an automated phone service.
Each MoneyPak – physically just a printed piece of cardboard – came with a unique 14-digit code, which was the only thing standing between a total stranger and the funds deposited.
This had a lot of appeal in shadowy areas of the economy. For instance, a 2013 indictment of several members of the Baltimore branch of national prison gang Black Guerilla Family said that MoneyPak has become one of the group’s main financial instruments, with the gang even adopting “dots” as slang for the codes.
To close that loophole, Green Dot has been rolling out new electronic cash-transfer technology, through which cash deposits are loaded on prepaid debit cards automatically at a cash register, eliminating the need for codes.
Streit said initial adoption has gone well, with 75 percent to 80 percent of retailers using the new method, but he’s still projecting the business to take a hit from phasing out the code-based product. One interpretation could be that demand for the more secure offering might be lower than for a product that’s easy for criminals to use in nefarious ways.
Green Dot did not respond to requests for comment.
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