NetSpend's IPO rakes it in

Despite the recent troubles of its main issuing bank, NetSpend Holdings Inc. priced its initial public offering (IPO) at $11 per share on Monday, Oct. 17, 2010. It began publically trading its stock on the Nasdaq stock exchange the following day. Reports had the stock rising 18 percent on its Tuesday debut, climbing to $13.49 before closing at $13.

It was reported on Wednesday that at $13.37 a share, NetSpend had an enterprise value of $1.2 billion, which means its 2.1 million active prepaid cards were worth approximately $590 each; in comparison, the shares of NetSpend's main competitor, Green Dot Corp., are valued at about $630 per active card.

NetSpend's IPO comes on the heels of action taken by the Office of Thrift Supervision, a federal bank regulation agency, against MetaBank, the primary issuing bank of NetSpend's cards. The OTS told MetaBank to discontinue its iAdvance loan program. The program is offered to consumers through NetSpend's prepaid cards.

According to a Securities and Exchange Commission filing, NetSpend said the OTS determined that MetaBank engaged in "unfair or deceptive acts or practices in connection with its operation of the iAdvance program."

NetSpend, the second largest U.S. provider of general purpose reloadable prepaid cards, said that approximately 71 percent of its active prepaid debit cards were issued by MetaBank. Given MetaBank's situation and possible future actions by the OCS on the issuing bank, NetSpend warned that it may be forced to move its cards to another issuer.

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