A San Francisco hedge fund wants prepaid debit card firm Green Dot Corp. to boot founder Steve Streit from the corner office, saying the longtime chief executive has mismanaged the company, resulting in big losses over the years.
Harvest Capital on Monday sent a letter to Green Dot's board of directors, saying the Pasadena company needs to bring in a more experienced CEO to replace Streit and make other changes to reverse a long slide in the company's share price.
"In our view, Mr. Streit must be immediately replaced due to his persistently poor performance, misleading and inconsistent investor communications and inability to deliver on promises to shareholders," Harvest wrote.
Harvest, which has a 6.2% stake in Green Dot, also wants the company to cut costs, replace two board members and do more lending through Green Dot Bank. The Utah bank, owned by the company, has a tiny loan portfolio for a bank of its size and makes very little money from interest.
Green Dot on Monday afternoon released a statement saying it would "carefully review" Harvest's suggestions but that it is "confident in our road map for growth." The company did not make Streit available for comment.
Green Dot, founded in 1999 and a public company since 2010, was a pioneer in the business of issuing prepaid debit cards -- reloadable cards that are similar to those that come with a checking account but that can be purchased at many convenience stores.
The company remains one of the nation's top prepaid card issuers, but it has faced increased competition over the past few years. Meanwhile, costs have climbed, profits have slid and the company remains dependent on Wal-Mart, which sold half of all Green Dot cards in the most recent quarter.
The company's best year was 2011, when it reported net income of $52.1 million on revenue of $467 million. In 2014, profit was just $42.1 million on revenue of $602 million. Through the first nine months of last year, Green Dot was on pace to barely top 2014's profit figure.
The past year has been especially rough for the company, which lost a big source of revenue when it discontinued Moneypak, a product designed to let customers load cash onto debit cards but that became a popular tool for scam artists.
Revenue for the Green Dot division that oversaw Moneypak was $28.5 million in last year's third quarter, down more than a third from the same period a year earlier.
Jeffrey Osher, a Harvest portfolio manager, said Green Dot is growing more slowly than it should, given how well the prepaid industry is doing.
"New products have failed to stimulate growth," Osher said. "That comes down to a lack of execution. It's not an industry issue. The industry is actually quite healthy."
Green Dot has announced a handful of new initiatives for this year, including a checking account product for small-business owners and gig workers as well as a credit card. But Osher said he's not convinced they will boost the company's fortunes.
"This management team, under its current composition, does not have a pattern of successful execution of new product launches," he said. "It's been one failure after another."
In its letter, the hedge fund called Streit -- a former radio disc jockey who first envisioned prepaid cards as a way for kids to safely spend money online -- as an "entrepreneurial visionary." But it noted that Green Dot is no longer a start-up, but a big, complex firm in need of more experienced leadership.
"Personally, I like Steve," Osher said. "I just don't think he's the right leader for Green Dot today."
Osher would not comment on what role, if any, he would like Streit to have with the company.
Analysts who follow Green Dot don't expect much better performance. Most rate it a "hold," with a target price of just under $20 -- the high end of where shares have traded for the past year.
Shares have been trailing the market for years, losing 60% of their value since the company's initial public offering. That's despite a bull market that sent the S&P 500 up more than 70% over the same period.
Green Dot shares ticked up 1.6% Monday to close at $17.36.
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