(October 13, 2010) Federal banking regulators this month cracked down on MetaBank, a major prepaid card issuer, an action that threw into question the pending initial public offering of prepaid card program manager NetSpend Corp.
Austin, Texas-based NetSpend is scheduled to price its long-planned IPO on Thursday, according to reports on the financial wires. But its close ties to MetaBank triggered rounds of speculation about whether the IPO will actually happen. A NetSpend spokesperson says he can’t comment.
On Tuesday, MetaBank’s parent company, Storm Lake, Iowa-based Meta Financial Group Inc., reported to the Securities and Exchange Commission that the Office of Thrift Supervision had taken enforcement actions against MetaBank. The OTS banned MetaBank from issuing any new loans under its iAdvance product as of Wednesday, and it also placed controls on its business of issuing loans in advance of customers’ receipt of tax refunds, so-called tax-refund anticipation loans.
“The OTS advised us on Oct. 6 that it has determined that the bank engaged in unfair or deceptive acts or practices in violation of [the Federal Trade Commission Act and OTS advertising regulations] in connection with the bank’s operation of the iAdvance program and required the bank to discontinue all iAdvance line-of-credit origination activity by Oct. 13, 2010,” Meta Financial’s filing says. The filing does not give details about what the OTS found at fault with iAdvance, which is a short-term loan product that MetaBank calls a “microloan” though some news reports call it a payday loan. MetaBank offers the service to NetSpend and other clients for whom it issues prepaid cards. The number of such loans and their total receivables were not immediately available. An OTS spokesperson refused to comment, and a Meta spokesperson referred a Digital Transactions News call to an executive who did not respond by late Wednesday.
The filing also says that due to Meta’s third-party relationship risk, other risks, and its rapid growth—growth the filing attributed to the expansion to its Meta Payment Systems processing division—the OTS was requiring it to get approval from its regional director before it could engage in various business activities. The company needs an OTS okay before it can enter into new third-party relationships, originate new tax-refund loans, or even offer income-tax transfers during the 2011 tax season.
In any event, Meta Financial said the discontinuance of iAdvance and the potential discontinuance of tax-related programs now subject to OTS approval would “eliminate a substantial portion” of Meta Payment Systems’ gross profit. Meta’s shares closed down 33% on Wednesday.
The possible problem for NetSpend is that it is so closely intertwined with MetaBank. NetSpend manages 2 million active prepaid cards, and MetaBank issues 71% of them, according to a filing the company made to the SEC last week in advance of the IPO. NetSpend holds 4.9% of Meta Financial’s equity, an action the program manager took “in order to further align our strategic interests with MetaBank,” NetSpend’s filing says.
Prepaid card researcher Tim Sloane of Mercator Advisory Group Inc. says he doubts iAdvance alone was a material part of Meta’s business, but he notes that only Meta and the OTS have the full details. “It might be the OTS is wrestling with how to manage prepaid in sponsoring banks, and in figuring that out, they’ve put these restrictions in place,” he says.
Investment bank Morgan Stanley issued a report Wednesday saying Meta’s woes amount to an endorsement of the strategy of NetSpend rival Green Dot Corp., which is in the processing of buying a bank. “Better to be in control of your own destiny,” Morgan Stanley said.
NetSpend plans to sell 2.27 million shares at $10 to $12 apiece, which would generate $22.7 million to $27.2 million before underwriting expenses. NetSpend’s current owners plan to sell 16.3 million shares.
(13. oktobar 2010.) Federalni bankarski regulatori su ovog meseca razbili MetaBank, glavnog izdavaoca pripejd kartica, akciju koja je dovela u pitanje inicijalnu javnu ponudu menadžera programa za pripejd kartice NetSpend Corp.
NetSpend sa sedištem u Ostinu u Teksasu trebalo bi da u četvrtak odredi cenu za svoj dugo planirani IPO, prema izveštajima o finansijskim izveštajima. Ali njene bliske veze sa MetaBank-om pokrenule su krugove spekulacija o tome da li će se IPO zaista dogoditi. Portparol NetSpenda kaže da ne može da komentariše.
U utorak, MetaBank-ova matična kompanija, Storm Lake iz Ajove, Meta Financial Group Inc., prijavila je Komisiji za hartije od vrednosti da je Kancelarija za nadzor štednje preduzela mere prinude protiv MetaBank-a. OTS je od srede zabranio MetaBank da izdaje bilo kakve nove zajmove u okviru svog iAdvance proizvoda, a takođe je stavio kontrolu nad poslovanjem izdavanja kredita pre nego što klijenti dobiju povraćaj poreza, takozvane zajmove sa predviđanjem povrata poreza.
„OTS nas je obavestio 6. oktobra da je utvrdio da je banka učestvovala u nepoštenim ili obmanjujućim radnjama ili praksama koje su u suprotnosti sa [Zakon o saveznoj trgovinskoj komisiji i propisima o oglašavanju OTS] u vezi sa funkcionisanjem banke iAdvance programa i zahteva banka će prekinuti sve aktivnosti iAdvance kreditne linije do 13. oktobra 2010.“, kaže se u podnesku kompanije Meta Financial. U podnesku se ne navode detalji o tome šta je OTS otkrio da je kriv za iAdvance, koji je proizvod kratkoročnog zajma koji MetaBank naziva „mikrokreditom“, iako ga neki novinski izveštaji nazivaju kreditom do dana isplate. MetaBank nudi uslugu NetSpendu i drugim klijentima za koje izdaje pripejd kartice. Broj takvih kredita i njihova ukupna potraživanja nisu bili odmah dostupni. Portparol OTS-a je odbio da komentariše, a portparol Meta-a je uputio poziv vesti o digitalnim transakcijama izvršnoj vlasti koja nije odgovorila do kasno u sredu.
U podnesku se takođe navodi da je zbog Meta-inog rizika veza sa trećim stranama, drugih rizika i njegovog brzog rasta – rasta koji se pripisuje proširenju svog odeljenja za obradu sistema Meta Paiment Sistems – OTS zahtevao da dobije odobrenje od svog regionalnog direktora pre moglo se baviti raznim poslovnim aktivnostima. Kompaniji je potrebno odobrenje za OTS pre nego što može da stupi u nove odnose sa trećim stranama, da pokrene nove zajmove za povraćaj poreza ili čak ponudi transfere poreza na prihod tokom poreske sezone 2011.
U svakom slučaju, Meta Financial je rekao da bi ukidanje iAdvance-a i potencijalno ukidanje programa u vezi sa porezima koji sada podležu odobrenju OTS-a „eliminisali značajan deo“ bruto dobiti Meta Paiment Sistems-a. Akcije Mete su u sredu pale za 33 odsto.
Mogući problem za NetSpend je to što je tako blisko isprepleten sa MetaBank-om. NetSpend upravlja sa 2 miliona aktivnih pripejd kartica, a MetaBank izdaje 71% njih, prema dokumentaciji koju je kompanija podnela SEC-u prošle nedelje pre IPO-a. NetSpend drži 4,9% kapitala kompanije Meta Financial, akciju koju je programski menadžer preduzeo „kako bi dodatno uskladio naše strateške interese sa MetaBank“, kaže se u NetSpend-ovoj prijavi.
Istraživač prepaid kartica Tim Sloane iz Mercator Advisori Group Inc. kaže da sumnja da je sam iAdvance bio materijalni deo Metinog poslovanja, ali napominje da samo Meta i OTS imaju sve detalje. „Možda se OTS bori sa načinom upravljanja prepaid-om u bankama sponzorima, a dok su to shvatili, oni su postavili ova ograničenja“, kaže on.
Investiciona banka Morgan Stanlei objavila je u sredu izveštaj u kojem se kaže da se Metini problemi svode na odobravanje strategije NetSpend rivala Green Dot Corp., koja je u procesu kupovine banke. „Bolje je da kontrolišete svoju sudbinu“, rekao je Morgan Stenli.
NetSpend planira da proda 2,27 miliona akcija po ceni od 10 do 12 dolara po komadu, što bi generisalo 22,7 miliona do 27,2 miliona dolara pre troškova preuzimanja. Trenutni vlasnici NetSpenda planiraju da prodaju 16,3 miliona akcija.
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