Short MoneyCard Contract Extension With Wal-Mart Casts a Shadow Over Green Dot

Green Dot Corp.’s stock fell 8% Tuesday morning after the prepaid card services provider reported Monday that it had extended its agreement with Wal-Mart Stores Inc. to issue and manage the Walmart MoneyCard only until Dec. 31, 2015. In the view of investors, the short extension of a five-year agreement set to expire next May could mean that Wal-Mart is looking seriously at other potential issuers for the general-purpose reloadable card.

The MoneyCard is the centerpiece of a longstanding partnership between Pasadena, Calif.-based Green Dot and Wal-Mart, which accounted for 51% of Green Dot’s revenues in the third quarter.

Investment firm Keefe Brunette & Woods issued a brief report about the extension late Monday saying that Wal-Mart may need more time to complete a request-for-proposals process to evaluate other potential prepaid card companies to take over the MoneyCard.

“Positively, the extension gives Green Dot visibility from Walmart-related revenues for the rest of 2015, and the company is still actively engaged in the negotiation process,” the note from analyst Sanjay Sakhrani says. “That said, there are still some uncertainties given the revenue concentration as well as Walmart’s needing more time in the RFP process, which could mean that there are other players involved who represent formidable alternatives for Walmart.”

A Wal-Mart spokesperson tells Digital Transactions News by email that “we simply required more time than anticipated to conclude our RFP process. I wouldn't read anything positive or negative into this short extension.”

Green Dot declined to comment. Green Dot’s shares were trading at $20.02 late this morning on the New York Stock Exchange, down $1.78 from Monday’s $21.80 close.

Green Dot has managed the MoneyCard for years and recently took over actual issuance of the card from GE Capital Retail Bank through its subsidiary, Green Dot Bank. While Bentonville, Ark.-based Wal-Mart accounts for more than half of its revenues, Green Dot’s reliance on the huge retailer has declined from 62% last year.

The stock of gateway and e-commerce services provider Digital River Inc. swooned earlier this month when the firm reported that it had given its largest customer, Microsoft Corp., extra time to declare its intentions about renewing an agreement under which Digital River manages the online Microsoft Store. Microsoft, which accounts for 32% of Digital River’s revenues, ultimately did renew, giving a big boost to Digital River’s stock and removing a cloud over the company’s planned $840 million buy-out by a private-equity firm.