Green Dot Responds in Measured Tones After Fiery Investor Calls for CEO’s Firing

Prepaid card services provider Green Dot Corp. has struggled to make profits sufficiently large to keep restive shareholders at bay since it became a publicly traded company in 2010. Now one of those shareholders, Harvest Capital Strategies LLC, is calling for the ouster of company founder and chief executive Steve Streit and changes on its board of directors, which Harvest says is overly protective of Streit.

Harvest Capital, which owns 6.2% of Pasadena, Calif.-based Green Dot’s common stock, on Monday morning issued a strongly worded press release, which links to a Web site it created, www.FIXGDOT.com. The site includes a letter it wrote to the board and a 93-page presentation that lays out Harvest’s case that Green Dot needs fixing, fast.

“Harvest can no longer sit idly by while the board and CEO Steve Streit continue to destroy shareholder value quarter after quarter,” says the letter, signed by managing director Jeffrey B. Osher and director Craig Baum. “As shareholder value burns, Mr. Streit and his board continue to fiddle. As such, we have no choice but to make our concerns regarding Green Dot publicly known at this time.”

San Francisco-based Harvest, which manages $2.3 billion in assets, says that “in our view, Mr. Streit must be immediately replaced due to his (i) persistently poor performance, (ii) misleading and inconsistent investor communications and (iii) inability to deliver on promises to shareholders.” The presentation pegs shareholder losses over five years at 71%, and says that Green Dot rival NetSpend, now part of processor Total System Services Inc. (TSYS), has performed far better.

Harvest praised Streit’s early work in building Green Dot, but says that now that it has grown and diversified, it needs different management skills. In recent years, Green Dot’s acquisitions have included a bank and a tax-refund services company. “The Green Dot of today requires a proven leader who can deliver consistent performance for shareholders. Mr. Streit has proven over many years he is not that person,” the letter says. It goes on to say that the board, due to its “complacency and misalignment … must be immediately reconstituted” with new members.

In contrast, Green Dot late Monday issued a brief statement that uses much more measured tones. “Members of Green Dot’s board and management have held numerous calls and hosted meetings with Harvest Capital and we will carefully review their suggestions,” the statement says.

Green Dot also says that under Streit’s leadership, the company has established a “strong competitive position against existing and numerous new competitors,” renewed its contract with its biggest customer (Wal-Mart Stores Inc.), and positioned itself to work with current and pending government regulations that could have “a severe impact” on its rivals.

A Green Dot spokesperson declined to comment beyond the statement.

What to make of all this? Analyst Larry Berlin, a vice president at Chicago-based First Analysis Securities Corp., says Green Dot’s earnings “have been, quite often, disappointing over time. We think that there is room for improvement.”

Unlike Harvest, First Analysis has no equity stake in Green Dot. But says Berlin: “If you look at [Harvest’s] grievances, we’ve had some of the same questions.” Berlin, however, would not comment on Harvest’s demands that Streit be fired and changes be made to the board of directors.

Nearly a year ago Green Dot closed down one of its most popular products, the MoneyPak reload kit, a strong revenue generator that proved to be highly popular with fraudsters. And it is working to reduce its heavy reliance on Wal-Mart, which at one time accounted for almost two-thirds of revenues. Now Wal-Mart’s share is down to about 50%.