story by Susanna Pak
Green Dot Corp., the prepaid-card firm that derives most of its revenue from Wal-Mart Stores Inc., fell the most in two months after the world’s biggest retailer said it would expand sales of a competing product from American Express Co.
Green Dot slid 20% to $10.26 at 11:28 a.m. in New York, the most since July 27. Shares of the Monrovia, Calif.-based company have dropped 67% this year.
American Express reached a deal to make its Bluebird reloadable cards available at 4,000 Wal-Mart locations and online beginning next week, the New York-based lender said today in a statement. The cards, which can be used for debit purchases, may threaten sales at Green Dot, which derived 64% of its revenue through Wal-Mart in the first half of 2012, according to an Aug. 9 regulatory filing. Wal-Mart was among Green Dot’s biggest shareholders as of March 31, with a 6.2% stake, data compiled by Bloomberg shows.
Wal-Mart’s “equity stake in Green Dot is totally inconsequential relative to the opportunity to expand the product category,” said Andrew Jeffrey, an analyst at SunTrust Robinson Humphrey Inc. “There’s no positive spin that can be put on” when a vendor loses its role as dominant supplier.
The agreement with American Express represents a “broadening” of Wal-Mart’s card offerings and the company has no plans to discontinue its deal with Green Dot, said Daniel Eckert, the retailer’s vice president of financial services.
“We’re focused on a different customer segment,” Eckert said on a conference call with reporters. He said the card “can be a substitute or a complement, depending on the customer’s choice, to an everyday checking and debit service.”
Liz Brady, an external spokeswoman for Green Dot at Integrated Corporate Relations Inc., said the company had no immediate comment.
Consumers can load money onto the Bluebird cards at Wal-Mart locations or electronically through their bank accounts, and use them as they would a debit card where American Express is accepted, the lender said in the statement. Bentonville-based Wal-Mart began testing the product at some stores last year.
The agreement may help American Express expand beyond its core credit- and charge-card business and drive more spending to its global payments network. Targeting Wal-Mart customers also contrasts with American Express’s traditional focus on affluent consumers.
“Now we have the ability to address different segments of not just the U.S. markets, but frankly across the world as well as those who might not be traditionally best served through a charge or credit product,” Dan Schulman, group president of the firm’s enterprise growth business, said on the call.
Green Dot rallied 9.6% to $24.25 on July 2 after Ramsey El-Assal, a Jefferies Group Inc. analyst, said Wal-Mart was winding down the American Express pilot and that Bluebird sales were “significantly weaker” than Green Dot products.
In a note released today (Oct. 8) after the call, El-Assal predicted that Bluebird will probably gain share at Wal-Mart, given the card’s “aggressive roll-out schedule,” lower fees and “enhanced” features like online access.
“We believe today’s announcement represents an incremental downside surprise for investors,” even after Green Dot lowered its guidance to account for a potential loss of retail exclusivity, El-Assal wrote.
American Express lost 8 cents to $58.48 in New York. The shares have gained 24% this year, compared with a 16% advance in the Standard & Poor’s 500 Index.