Green Dot Corporation is facing a lawsuit from an unnamed plaintiff who alleges that the Pasadena based financial technology and bank holding company violated federal securities laws by giving false and misleading statements. The suit was filed on behalf of purchasers of Green Dot common shares.
According to Shareholders Foundation Inc., a professional loss-prevention, settlement recovery, portfolio monitoring service that specializes in securities class action and other legal actions, the allegedly false and misleading statements by Green Dot Corporation were made between May 9, 2018 and November 7.
The suit alleges that the corporation made false and/or misleading statements and/or failed to disclose that Green Dot’s strategy to attract “high-value” long-term customers was at the expense of “one and done” customers, and that Green Dot’s “one and done” customers represented a significant source of revenues in its legacy segment, and that consequently, Green Dot’s strategy was self-sabotaging.
The summary stated that Green Dot Corporation CEO Steven W. Streit said during a February 20th conference call that the company’s strategy of attracting customers actually was at the peril of its one and done investors. “We are somewhat a victim of our own success in converting more and more of our quarterly active accounts to direct deposit active accounts.” These “one and done” customers represented a significant source of revenue in the Company’s legacy segment. After the release of Streit’s statement the shares in Green Dot fell 10 percent.
Over the span of the next seven months the stock price continued to drop because of moves that caused investors to lose confidence.
On May 8th, Green Dot released its financial results for the first quarter of 2019 which showed dramatically reduced earnings guidance. The corporation began to experience further financial woes disclosing during another conference call that it was “experiencing some erosion” in the number of legacy product line, non-direct deposit active accounts, primarily from its legacy brick and mortar retail channel and to a lesser degree from its RushCard and AccountNow digital direct brands.
This along with a disclosure that a large “investment in growth for the purpose of aggressively marketing new products.” caused the stock to tumble 26.4 percent.
On August 7th Green Dot disclosed that additional problems with its legacy products and reduced its fiscal year outlook, and disclosing “lower than anticipated prepaid unit sales” that it said caused a material reduction in active prepaid accounts which in turn sent it stock price spiraling down 50 percent.
Three months later on November 7th Green Dot revealed a decline of 620,000 accounts in its active consumer business. On this news, the price of Green Dot shares fell 18.1 percent.
Finally, on December 18th Green Dot announced the retirement of both its CEO and CFO. On this news, the price of Green Dot shares fell another 10.4 percent.
The suit has been filed according to the Shareholders foundation in the U.S. District Court for the Central District of California. Any investors who wish to be named in the class action must do so by February 17th 2020.