A bitter fight at the prepaid card pioneer Green Dot has spilled into public view, with one of its largest shareholders calling for the ouster of founder and long-running Chief Executive Officer Steve Streit.
Shortly after Harvest Capital Strategies LLC demanded a management shake-up Monday, Pasadena, Calif.-based Green Dot responded with a statement in support of Streit, who founded the firm in 1999 and led it through an initial public offering in 2010.
"Green Dot maintains a very active dialogue with our shareholders and welcomes their input as a part of our commitment to continually evaluate options to enhance long-term value and to act in the best interests of all our shareholders," the statement read. But "we are confident in our road map for growth."
Harvest Capital, which owns a 6.2% stake in Green Dot, argued that the card issuer has made strategic missteps, delivered weak financial results and repeatedly destroyed shareholder value since its IPO.
It cited missed revenue targets and the recent discontinuation of MoneyPak, a Green Dot product that proved vulnerable to fraudsters, among other examples.
While the investment firm praised Streit for his work between 1999 and 2010, it offered a harsh assessment of the company's performance in the years since.
"The Green Dot of today requires a proven leader who can deliver consistent performance for shareholders," the letter stated, emphasis included. "Mr. Streit has proven over many years he is not that person."
Shares in Green Dot were sold at $36 during the company's July 2010 IPO. After the markets closed Monday, they were selling for $17.36, up 1.6% from the previous trading day's close.
In a 93-page presentation posted at a newly launched website, www.fixgdot.com, Harvest Capital laid out a detailed case in favor of major changes inside Green Dot.
In addition to calling for the termination of Streit as both CEO and chairman, Harvest Capital also seeks the ouster of two more of Green Dot's eight directors, Kenneth Aldrich and Timothy Greenleaf.
Harvest Capital argued that if the management changes are not implemented, the company should explore strategic alternatives. "We believe there would be numerous financial and strategic acquirers interested in Green Dot," the presentation stated.
At an investor conference last month, Streit defended a series of investments Green Dot has made, arguing that the firm takes a long-term perspective that would begin to pay off for impatient shareholders.
"For some people we're the biggest-performing stock they have, if they bought us at $9 a share, and we're at $16 and change," he said. "But for others who are long holders, who bought us at $25 or $30, we know it's been a very frustrating couple of years. I get that. But it's been time well spent."
Harvest Capital stated Monday that it bought its shares in late 2012, and said that it is not an activist investor.
"We have only taken the difficult step of making our concerns public after exhausting all private avenues," the investment firm wrote in its presentation. "The board has made its position clear: protecting the status quo is more important than protecting the best interests of its shareholders."
Harvest Capital stated that it was "hopeful" about Green Dot in 2012, "supportive" in 2013, "confused" in 2014, "concerned" last year, and "confronting the facts" in 2016.
The investment firm's presentation represents a bare-knuckled attack on Streit's leadership.
For example, the document accuses Green Dot's board of making changes to the list of peer firms on its annual proxy in a "blatant attempt to justify increased compensation to Mr. Streit," since the board uses Green Dot's relative performance as a reference point for management compensation.
"Green Dot's closest competitor TSYS, which was already considered a peer in 2013 and 2014, was inexplicably removed from the peer group after acquiring competitor NetSpend," the presentation states.
Harvest Capital also called attention to numerous changes in the company's executive suite, saying that the losses have likely contributed to what it characterized as poor execution of its business plan.
"The board has been willing to move several chess pieces in the hopes of generating better results; but has failed to hold accountable the most important piece, the CEO, who has remained free of blame," the investment firm's presentation states.
In its response, Green Dot said it has held numerous calls and hosted meetings with Harvest Capital, and will carefully review its suggestions.
The company made reference to the renewal of a contract with Walmart, where a large percentage of Green Dot cards are sold, in defending Streit's record as CEO.
At the same time, Green Dot indicated that it is better prepared for soon-to-be-finalized new rules on prepaid cards than some of its competitors.
"Under Steve Streit's leadership, Green Dot has established a strong competitive position against existing and numerous new competitors, renewed a long-term contract with its largest customer, made several highly accretive acquisitions and positioned its business in full alignment with key current and pending regulatory changes, which could potentially have severe effects on Green Dot's competitors."
"Additionally, the company authorized a significant share-repurchase program and committed to ongoing share repurchases through 2018," Green Dot's statement continued. "These achievements have positioned Green Dot well for long-term growth."