PR Newswire
SAN FRANCISCO, May 9, 2016
SAN FRANCISCO, May 9, 2016 /PRNewswire/ -- Harvest Capital Strategies LLC (together with its affiliates, "Harvest"), one of the largest shareholders of Green Dot Corporation ("Green Dot" or the "Company") (NYSE: GDOT), with beneficial ownership of approximately 9.3% of the outstanding common stock of the Company, announced today that it has delivered an open letter to its fellow Green Dot shareholders. In the letter, Harvest condemns Green Dot for launching an exceedingly unprofessional and desperate smear campaign against Harvest's highly qualified, independent nominees and urges its fellow shareholders to see through the Company's distasteful propaganda and focus on the real and critical operational issues and opportunities facing the Company when voting in this election contest.
The full text of Harvest's Letter to its Fellow Shareholders follows:
Dear Fellow Green Dot Shareholders:
It Is Time for Real Change at Green Dot
Ignore the Company's Desperate Smear Campaign and Focus on the Facts
Vote the GREEN Proxy Card Today
The 2016 Annual Meeting (the "Annual Meeting") of Green Dot Corporation (the "Company") is less than two weeks away. We appreciate the tremendous level of support we continue to receive from you in this election contest. As shareholders, collectively, we have an exciting opportunity to turn over a new leaf at Green Dot and elect a slate of extremely qualified director candidates who are deeply committed to putting Green Dot back on track for long-term value creation and holding long-tenured, entrenched Board members and the chronically-underperforming Chairman, President, and CEO, Steve Streit, accountable for years of value destruction.
Harvest delivered its first private letter to Green Dot's Board on March 23, 2015. For more than a year, through many private and public correspondences, we have conscientiously avoided personal attacks in order to squarely focus on the long-term facts supporting the need for leadership change: chronic shareholder value destruction, poor execution against major strategic initiatives, Steve Streit's misleading and untruthful shareholder communications, and a culpable, inexperienced Board that enables Mr. Streit's fiefdom-like autocratic leadership.
Unfortunately, since the current Board does not believe it can win on the merits, the Company has recently resorted to highly unprofessional and unethical personal attacks against our director nominees that are clearly based on misleading gimmicks and false information. Rather than focus on the facts, Green Dot has instead launched a smear campaign in an attempt to discredit our nominees and distract shareholder attention from the Board and Mr. Streit's own failures. We have a high level of confidence that shareholders will see through the Board's last ditch effort to combat widespread support for Harvest's campaign and further entrench the destructive status quo. Apparently it was not enough for the current Board to disenfranchise shareholders by unilaterally appointing three new directors during this election contest or attempting to grossly mislead shareholders about the Company's weak performance and execution. The current Board's reprehensible tactics make us all the more convinced that real leadership change is immediately required at Green Dot.
Make no mistake about it, we will not lower ourselves to these sort of unprincipled tactics that are wholly unbecoming of a public company board of directors, nor will we be deterred from our mission of providing shareholders with a democratic forum that will unequivocally serve as a referendum on Mr. Streit's unacceptable performance. We do, however, feel compelled to provide documented facts that demonstrate the breadth and degree of the Company's effort to disingenuously smear Harvest's highly qualified director nominees, whose only role in this campaign has been their selection by Harvest for their relevant expertise, experience, and willingness to stand for election as shareholder representatives.
If our nominees are elected, it will demonstrate an irrefutable vote of no confidence in Green Dot's current leadership, which would make it incumbent upon any Board working for, and listening to, its shareholders to address the toxic and unsuitable "tone at the top." Harvest is aware of several proven, world-class executives, who are excited about the opportunity to lead Green Dot and could be quickly installed by an independent Board to finally put Green Dot on a sustainable path of value creation and honest communication.
Ask Yourself, If the Facts in this Election Contest Were in Their Favor, Would Mr. Streit and the Board Really Have Engaged in Such a Hapless and Disingenuous Smear Campaign?
Throughout this campaign we have kept our communications with you focused on the facts, the Company's business and financial performance, and our proposals to best position Green Dot for the future so that you can objectively choose the best slate of director nominees. Unlike the current CEO and Board, we have no interest in engaging in personal attacks to gain votes in this election contest. We are confident that our fellow shareholders will see through the Company's tactless propaganda and instead focus on the real and critical operational issues and opportunities facing Green Dot. It is unfortunate that Mr. Streit and his Board have refused to take a fact-based approach to their campaign. Instead, the Company has pursued a strategy premised on attempting to re-write and alter historical facts, and now, recklessly impugning the character of Harvest's three highly qualified director nominees to distract your attention away from the core issues we have raised.
Green Dot has scrambled to create the illusion of positive governance changes, such as introducing "performance-based" compensation (Mr. Streit is still awarded millions of dollars if Green Dot's stock price underperforms 75% of the market), and adding three new directors to the Company's Board (who were unilaterally appointed just six weeks prior to a shareholder vote). The fact remains, however, that Mr. Streit and the current Board have taken these gratuitous actions to avoid any meaningful change at Green Dot. Ask yourself whether these so-called improvements have really changed anything at Green Dot or are Mr. Streit and the incumbent Board just perpetuating the status quo.
Green Dot's sensationalized mischaracterization of Harvest's nominees through false statements that can be easily fact-checked, and the unethical use of "quotations" around fabrications that were never written or stated is careless and unprofessional. That Green Dot purposefully included unflattering photos of our nominees in its presentation materials exemplifies the Board's childish conduct and undermines its own credibility. Additionally, we believe Green Dot's liberal use of out-of-context snippets from social media and anonymous quotations with endnote attributions that are also anonymous, only strengthens Harvest's argument that Green Dot's CEO and Board operate free of accountability and will say and do anything, regardless of its validity, to sway your vote and protect the status quo. The Board, who has a fiduciary duty to protect independent shareholders, has failed to rectify Green Dot's toxic "tone at the top" and repeatedly enabled Mr. Streit's unprofessional behavior. We urge you not to be misled and to review the facts and circumstances in making your voting decisions regarding the future leadership of Green Dot.
While we will not engage with Mr. Streit in juvenile and unproductive exchanges, we would be remiss if we failed to set the record straight regarding several of Green Dot's most deceitful, hypocritical and outlandish defamations of character, as well as Mr. Streit's newest salesman-like distortions. For a fact-based analysis on Green Dot's Class III Directors, Harvest's director nominees, and Mr. Streit's long history of execution mistakes, financial forecasting errors, and misleading and unethical investor communications, we would encourage all shareholders to review our most recent presentation from April 27, 2016, titled "The Path Towards Shareholder Value Begins with a New "Tone at the Top," (www.fixgdot.com).
GREEN DOT'S SHAMEFUL SMEAR CAMPAIGN:
Setting the Record Straight on Highly Qualified Harvest Nominee Nino Fanlo
Setting the Record Straight on Highly Qualified Harvest Nominee Phil Livingston
Setting the Record Straight on Highly Qualified Harvest Nominee George Gresham
You Can't Afford to Believe What Mr. Streit Is Telling You
Do not be distracted by Green Dot's disgraceful rhetoric aimed squarely at misdirecting blame for Mr. Streit's track record of value destruction. Neither the Board nor Mr. Streit can conceal the plain truth regarding the Company's disastrous long-term financial performance. Mr. Streit is trying to protect himself and the positions of two fellow long-tenured, underperforming directors by distorting the truth and trying to confuse shareholders about the facts. Consider the following:
Mr. Streit's Distortion: Mr. Streit states throughout his presentation that Green Dot's recent stock price increase is due to investors applauding the Company's six-step plan and target of $1.75 in 2017 adjusted EPS, introduced during an investor presentation on December 2, 2015, stating "Green Dot's stock has appreciated 35% since management publicly disclosed its new growth initiatives on December 2, 2015, prior to the Harvest 13D filing… [Harvest] has not put forward any coherent strategic plan…of the plans that Harvest does propose, they appear to be a copy of those plans announced and put into action by the Company prior to Harvest's 13D filing."
Fact: As a consummate salesman, Mr. Streit repeatedly attempts to re-write history, while twisting statements and facts into a new narrative to conveniently fit his agenda. In Green Dot's presentation from 12/2/15, there is not a single reference to a six-step plan or $1.75 EPS target. This six-step plan and $1.75 EPS target were first disclosed to investors on February 24, 2016, concomitant with Green Dot's Q4'15 earnings call, and one full month after Harvest released its public letter and presentation outlining a path to create long-term shareholder value. In fact, between 12/2/15 (the date Mr. Streit inaccurately claims he introduced his six-step plan) and 1/19/16 (the day Harvest crossed the 5% beneficial ownership threshold), Green Dot's stock price declined by 7%. Between 1/19/16 and 2/24/16, after Harvest released its plan but before Green Dot adopted many of our proposals in its six-step plan, the Company's stock price increased by 23%. The facts are straightforward: Green Dot's recent stock price increase has been due to Harvest's proposals and demand for a change in the toxic "tone at the top," despite Mr. Streit's thinly-veiled attempt to claim credit for Harvest's well-researched plan as his own.
Mr. Streit's Distortion: Green Dot's stock price decline since its IPO was due to several factors outside its control, namely:
1) A lofty IPO valuation
2) Increased competition, loss of exclusivity at major retail partners, and tightened risk
controls
3) Forced MoneyCard price reductions by Walmart, and
4) The carefully planned and executed removal of MoneyPak
Fact: In blaming multiple outside factors for Green Dot's poor stock performance, we believe Mr. Streit is carelessly attempting to re-write his poor strategic decisions and execution that Harvest has meticulously documented. Further, we believe such statements are insulting to Green Dot's IPO investors, and more importantly, we believe Mr. Streit's public criticism of Green Dot's largest customer is grossly negligent.
1) By blaming Green Dot's stock price decline on "a lofty IPO valuation," Mr. Streit is effectively stating that management and its investment bankers overpriced its IPO at $36.00 and then further overpriced its secondary offering at $61.00. Insiders sold approximately $425 million of stock across the two offerings.
2) Nearly every company in America faces competition. As we have previously argued, good management teams proactively anticipate and prepare for competition. NetSpend sure did. Implying that Green Dot warned investors about increased competition is an excuse that provided minimal comfort to long-term shareholders and sell-side analysts who endured a 61% single day stock price decline. Even more perverse, Mr. Streit is now attempting to re-write history portraying himself as a savior for notifying shareholders that Green Dot had lost all-important retail exclusivity, when in fact he had previously downplayed the importance of such exclusivity. Consider the Company's comments before and after Green Dot's Q2'12 earnings call:
Rather than proactively address potential competitive threats through new distribution channels and product innovation, Mr. Streit downplayed competition to investors and failed to anticipate the arrival and impact of new market entrants. While Mr. Streit can attempt to re-write the historical narrative, shareholders cannot re-write their losses.
3) We believe Mr. Streit's accusatory comments towards Walmart are symptomatic of his toxic management style, which Harvest has documented at length. Rather than accept responsibility for a poor strategic decision, Mr. Streit publicly denigrated his most important customer. Aside from Mr. Streit blaming Green Dot's largest customer for unsatisfactory changes to MoneyCard, it is fair to ask "If Mr. Streit did not believe lower MoneyCard prices would stimulate card usage and lead to greater overall revenue, why did he explicitly communicate this expectation to investors?"
4) In Harvest's presentations, we meticulously detail why we believe Mr. Streit's removal of MoneyPak, while a sound long-term strategy, was poorly executed, hastily implemented, and inaccurately communicated to both the retail distribution channel and shareholders. Mr. Streit's suggestion that he spent months carefully planning and analyzing the removal of MoneyPak is preposterous, and flies in the face of his original guidance to investors that MoneyPak was "not really a material driver of revenue and a less material driver of EBITDA," which of course preceded MoneyPak expectations being negatively revised in every quarter of 2015.[6]
Mr. Streit's Distortion: "[Green Dot] successfully diversified and grew its business by making several highly accretive acquisitions that diversified revenue and increased market share."
Fact: Since Green Dot's IPO, Mr. Streit has spent $507 million on multiple acquisitions.[7] We believe there have been material disappointments involving every transaction.
Mr. Streit's Distortion: "Green Dot has materially out-performed our Prepaid Industry Peer Group. The Harvest Peer group does not accurately portray the companies that Green Dot considers its prepaid industry."
Fact: We are genuinely surprised Mr. Streit would even attempt to defend Green Dot's stock price performance, let alone manipulate the data. Consider the following facts:
Harvest's Comments on Green Dot's First Quarter Earnings Results
Mr. Streit's statement that "Q1 was a fabulous quarter for Green Dot in every way with strong performance from all our diversified business lines," is inconsistent with fundamental analysis of the financial results. Despite the financial engineering and guidance gamesmanship in Q1'16, (i) Green Dot's revenue, EBITDA, per share earnings and active cards all declined year-over-year, (ii) Walmart revenue declines accelerated, (iii) the Company achieved none of the TPG synergies shareholders were promised, while we believe the CEO of TPG resigned, (iv) operating expenses continued to increase, and (v) the company guided Q2'16 revenue, EBITDA, and Adjusted EPS well below consensus estimates, marking the tenth consecutive quarter that Green Dot has missed or guided below consensus estimates. While Mr. Streit stated the weak guidance was a timing issue caused by revenue in Q1 that was pulled from Q2, we would point out that Green Dot's 1H'16 profitability guidance for EPS ($0.99) and EBITDA ($106.3 million) was below the prevailing 1H'16 consensus estimates ($1.07 & $109.4 million) prior to the Company's Q1 report.[12]
Do Not Be Misled -- Green Dot Has Not Attempted to Meaningfully Engage with Harvest in Good Faith
Green Dot's claims that it has tried to engage with us in good faith are simply false. For ten months, the Board repeatedly dismissed Harvest's private attempts at constructive engagement. Since the beginning of this contest, the Board first offered to have us participate in a search for additional directors and then made only one settlement offer – to add one of our nominees to the Board where not a single incumbent director responsible for the value-destruction would step down. We have repeatedly stated that the addition of new directors is not appropriate at Green Dot. The Company's supposed attempt to engage with us is not close to what the shareholders of Green Dot require in order to instill confidence that Green Dot will demonstrably change for the better. It is appalling to us that the Board insists on couching their obstinacy behind repeated references to one deeply inadequate and completely unreasonable offer. Make no mistake – this does not represent a constructive attempt to engage with us.
We Encourage You to Review our Investor Presentation Entitled "The Path Towards Shareholder Value Begins with a New 'Tone at the Top'"
We filed an extensive Investor Presentation with the SEC on April 27, 2016 laying out in detail our views regarding why leadership change is required at Green Dot, why our slate of nominees is far more qualified than the incumbent nominees to represent your best interests in the boardroom, and why our nominees have a superior path for restoring and enhancing shareholder value. We encourage you to review this presentation, which can be found on our website, www.fixgdot.com.
The powerful facts of our campaign, which unquestionably conclude that Green Dot requires an experienced, transformational, and trustworthy leader have never been clearer. As shareholders we deserve better and Harvest is aware of several proven, world-class executives, who are excited about the opportunity to lead Green Dot and who we believe would create substantial value over the long-term.
VOTE FOR THE MOST QUALIFIED SLATE OF DIRECTORS TO RESTORE AND ENHANCE THE VALUE OF YOUR GREEN DOT INVESTMENT
PLEASE SIGN, DATE, AND MAIL THE GREEN PROXY CARD TODAY
As Green Dot's largest shareholder, our interests are fully aligned with the interests of all Green Dot independent shareholders. We urge you to join us in voting for a new path on May 23, 2016.
Sincerely,
Jeffrey B. Osher
Harvest Small Cap Partners Master, Ltd.
About Harvest Capital Strategies LLC
Harvest Capital Strategies LLC is an investment firm founded in 1999 based in San Francisco.
Harvest Capital Strategies, LLC
Jeff Osher/Craig Baum, 415-869-4433
FIXGDOT@harvestcaps.com
www.FIXGDOT.com
Investors with questions on how to vote, please contact:
Okapi Partners LLC
Patrick McHugh/Lisa Patel
info@okapipartners.com
(212) 297-0720 or Toll-Free (855) 208-8903
[1] Case 2:12-cv-06492, U.S. District Court Central Dist. Of California Los Angeles
[2] http://members.calbar.ca.gov/fal/Member/Detail/100816
[3] Stocker Resources Inc. v. Assessment Appeals Board of Los Angeles County, case number B098199:
[4] https://www.sec.gov/Archives/edgar/data/1162315/000114036115037557/form8k.htm
[5] https://www.sec.gov/Archives/edgar/data/1162315/000114036115038077/ex99_1.htm
[6] Green Dot Q3'14 Earnings Call (10/30/14)
[7] Includes cash and fair value of stock issued. Includes $43.4 million for Loopt acquisition disclosed in press release on 3/9/12
[8] Green Dot Q1'12 Earnings Call (4/26/12)
[9] Green Dot 8-K filed 9/18/14
[10] Based on $65.2 million of cash and $21.4 million fair value of stock issued
[11] CapitalIQ. Peer returns based on equal-weighted average. Green Dot's original, Company-selected peer group provided in its 2013 and 2014 Proxy Statements consisted of Alliance Data Systems, Capital One Financial, Discover Financial, Euronet Worldwide, Global Cash Access, Global Payments, Heartland Payment Systems, Mastercard, MoneyGram, NetSpend, Total System Services, Visa, Western Union, and Wright Express. The Company's revised peer group provided in Green Dot's 2015 Proxy Statement consisted of Blackhawk Network, Cardtronics, Cash America International, Cass Information Systems, Euronet Worldwide, EZCorp, Global Cash Access, Heartland Payment Systems, Jack Henry & Associates, MoneyGram, Regional Management, WEX, and World Acceptance
[12] Estimates from FactSet & Bloomberg
[13] Based on $87.3 million of TPG revenue for nine months ended 9/30/14 disclosed in 8-K filed 12/12/14 and $70 million of TPG revenue in 2015 disclosed on Q1'15 earnings call (5/7/15)
[14] Excludes $7.6 million non-cash benefit from a change in fair value of contingent consideration and $5 million non-cash impairment charge in 2015
[15] https://www.consumeraffairs.com/credit_cards/green_dot_prepaid.html?page=2
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SOURCE Harvest Capital Strategies LLC
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