NetSpend could lose $1M in revenue due to MetaBank

AP News
Posted: Oct 18, 2010 8:17 PM
NetSpend could lose $1M in revenue due to MetaBank

NetSpend Holdings Inc., which offers prepaid debit cards, said Monday that it priced its initial public offering of 18.5 million common shares at $11 apiece. The stock will start trading Tuesday on the NASDAQ Stock Market with the symbol "NTSP."

NetSpend is selling 2.3 million of the shares and some shareholders are selling 16.3 million. The company said that within the next 30 days underwriters have the option to buy up to 2.8 million additional shares from selling shareholders.

The company was expected to price its IPO at between $10 and $12 each, and to raise $253 million from the offering. NetSpend had predicted net proceeds of about $21.4 million, which it plans to use to repay debt and to put toward general corporate purposes, including working capital, joint ventures and acquisitions.

Also Monday, NetSpend said in a regulatory filing that troubles at its preferred debit card issuer could cost the company $1 million in annualized revenue.

The news comes a day before the company, which provides prepaid debit cards, is expected to price its initial public offering.

NetSpend said in a filing with the Securities and Exchange Commission that it could lose revenue if MetaBank doesn't sign off on agreements with new distributors in a timely manner. As part of directive from the Office of Thrift Supervision, the bank must get government approval for any new agreements with credit product users. That could take several months, MetaBank told NetSpend.

The OTS last week ordered MetaBank to shut down its iAdvance program, a line of credit that NetSpend offers. The government said the bank allegedly engaged in unfair and deceptive practices.

NetSpend also said in Monday's filing that it's moving 15 percent of its prepaid debit cards to other issuing banks within the next three months to diversify its operations. The Austin, Texas, company has nonbinding agreements with the Bancorp Bank and H&R Block Bank.

If NetSpend has to move all of its MetaBank cards to another issuer, it estimates it will cost between $2.5 million and $3.5 million in one-time charges. MetaBank issues 71 percent of NetSpend's active prepaid cards. NetSpend owns a 5-percent stake in the bank's holding company, Meta Financial Group Inc.

MetaBank's woes are untimely for NetSpend. The company postponed its IPO last week after MetaBank's revealed the OTS mandate. Shares are set to be priced Tuesday and begin trading on Nasdaq Wednesday.

NetSpend is expected to price almost 2.3 million shares between $10 and $12 each. Selling shareholders are expected to offer 16.3 million more shares.

The company is expected to raise $253 million in the offering and use the $21.4 million in estimated proceeds to repay debt and for general corporate purposes, including working capital, joint ventures and acquisitions.