NetSpend IPO: Buzz Fueled by Greendot Success

by Mercator Advisory Group 0

In this article Renaissance Capital reviews Netspend’s position in the market, primarily pulling facts from the Netspend and Green Dot S-1 offerings. The article states that “Interest in NetSpend should be fueled in part by the successful upsized IPO of competitor Green Dot, which has gained 35% since its July debut IPO opportunity.” But then suggests that this may be tempered by the fact that “NetSpend’s growth [is] lagging Green Dot’s”.

With roughly two million active cards as of June 30, 2010, NetSpend is the second largest US provider of general-purpose reloadable prepaid debit cards (GPR cards), which are primarily designed for the 60 million “underbanked” customers in the US who lack full access to traditional checking and savings account.

With $7.6 billion of transactions made using its cards in 2009, representing a 40% share of this nascent market, NetSpend is one of the two clear leaders in this fast-growing space. Its $200 million IPO will follow in the footsteps of closest competitor Green Dot (GDOT

), which had a very well received IPO in July. Goldman Sachs (GS

), BofA Merrill Lynch (BAC

) and William Blair are the lead underwriters on the NetSpend deal, which is one of five scheduled on the IPO calendar for the week of October 11.

Card Characteristics

NetSpend cards are sold at 39,000 retail store locations, which range from check cashers like ACE Cash Express to grocery stores like Winn-Dixie. They are also issued by 800 corporate employers that use direct deposit NetSpend cards to pay employees without bank accounts.

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