Fintech Pioneer Versus Hedge Fund: Showdown for Green Dot’s CEOby
Top shareholder seeking Streit’s removal at meeting next week
Prepaid debit-card venture’s stock has slid 64% since 2010
Green Dot Corp. Chief Executive Officer Steve Streit, who helped pioneer the reloadable prepaid debit card, is fighting to keep control of the payments company he founded, waging a contentious, public battle with a typically quiet hedge fund.
The firm’s largest stockholder, Harvest Capital Strategies, is seeking to oust the CEO when shareholders hold their annual meeting on May 23. The fight heated up this week in competing press releases, even after Streit agreed Monday to relinquish his chairman title and his company endorsed George Gresham, a Harvest nominee, to become a director. Proxy advisers now offer different opinions on how investors should cast their votes, potentially reshaping management and the board.
Streit, 54, who got his start as a radio personality, created a fintech darling. He sold shares to the public in 2010 before a herd of payment-system startups helped make fintech -- short for financial technology -- the hot buzzword on Wall Street. The stock surged to $64.68 that December before tumbling in four of the past five years. It closed at $23.28 on Thursday in New York. Harvest has said that performance is “unacceptable.”
Larry Berlin, an analyst at First Analysis Corp., said Pasadena-based Green Dot has faced a variety of struggles. The company, which derived 46 percent of its operating revenue from a partnership with Wal-Mart Stores Inc. in 2015, was pressed to renegotiate that deal. Competitors piled in. Lawmakers and regulators introduced new rules. New products, such as the GoBank mobile checking account, failed to take off.
All of that “contributed to the poor performance,” Berlin said. “You’ve had Green Dot trying new things, some of which has worked and some of which hasn’t worked.”
The run-up to Green Dot’s annual meetings have been relatively sedate. Like most U.S. companies, it issues filings to cordially ask shareholders to gather and back managers on a proxy ballot. In a typical year, it updates the materials a few times. This year, it has filed about 40 amendments and updates. And then there’s the flurry of public statements.
“Shareholders have suffered through repeated disappointments due to glaring deficiencies in the CEO suite,” Harvest managing director Jeff Osher wrote in an open letter to Green Dot shareholders issued Thursday.
Harvest, based in San Francisco, is pushing for Streit to step down as CEO, and for shareholders to elect its three nominees. They are Gresham, former chief financial officer of Green Dot rival Netspend Holdings Inc.; Saturnino Fanlo, CFO of marketplace lender Social Finance Inc.; and Philip Livingston, former CEO of travel company Ambassadors Group Inc.
Green Dot, which had 4.75 million active cards as of March 31, says it won’t let the proxy fight distract it from a six-step plan to deliver $1.75 in non-GAAP earnings per share by 2017. The company said it is making progress toward the goal, and boosted revenue and profit forecasts for the current year after reporting first-quarter adjusted earnings of 78 cents a share, beating the 71-cent average of 15 analyst estimates.
Streit said in a statement on Thursday that Green Dot has “withstood an intense competitive onslaught” and remains a leader in its industry. “More importantly, we have a growth plan that will deliver long-term value for shareholders,” he said. The board “is holding management accountable to deliver that plan.”
Jamie Friedman, an analyst at Susquehanna International Group LLP, who has a neutral rating on the stock, credits Streit with creating “the category of prepaid.” Now, shareholders will decide whether to back that track record, and Green Dot’s growth plan, against Harvest’s challenge.
“I guess the question is: Is he the right guy to run them as a public company at this stage?” Friedman said. “That’s the dilemma.”