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What: Shares of prepaid debit-card makers Green Dot (NYS: GDOT) and NetspendHoldings (NAS: NTSP) fell as much as 25% and 18%, respectively, today after Wal-Mart (NYS: WMT) and American Express (NYS: AXP) announced they would combine forces to offer a prepaid debit card known as Bluebird. The service began as a pilot program late last year, but will now be expanded nationally.
So what: Green Dot already has an arrangement with Wal-Mart to provide prepaid cards, so its shares were hit the hardest. Wal-Mart says it has no plans to end that agreement, which expires in 2015, and is just looking to broaden its menu of financial services. Shares of Netspend, on the other hand, dove briefly at open and mostly recovered, down 6% at the time of writing.
Now what: These two small-cap stocks have been moving in opposite directions over the past year as Netspend has more than doubled, and Green Dot has fallen all the way from $35 to near $10. 60% of Green Dot's revenue comes from the retail giant, so this decision could be a dagger for the young financial services company. Netspend is diversified across four segments, and much less likely to be squeezed by the deal. Green Dot is also coming off an earnings miss that sent shares down by more than 60%.
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The article Why Green Dot and Netspend Shares Dropped originally appeared on Fool.com.
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