Shares of Green Dot jumped on Thursday after two analysts named the company the “clear winner” in what might prove to be an auction for Wirecard’s business, potentially injecting itself into a high-stakes fight for the German e-commerce and financial technology provider.
In a report published Thursday, UBS analyst Robert Napoli said that Green Dot’s “stalking horse bid” for Wirecard’s German business and its Payment Services unit appeared to be more favorable to shareholders than any of the publicly traded contenders. The German operations – which includes Wirecard’s open-platform payments business, led by CEO Michael Reschke – could fetch as much as 2.5 billion euros ($2.8 billion), according to one report published Monday.
So how did shares of Green Dot climb 8 percent on Thursday? Some investors appear to be responding to the positive analysis rather than Green Dot’s recent quarterly results, which were released on Wednesday.
Shares of Green Dot’s competitor, Snap Inc., have also tumbled 10 percent this week amid uncertainty about its long-term potential to compete as a company with its first-ever earnings report as a public company scheduled for next Tuesday. Snap is being sued by some investors claiming the stock was artificially inflated by misleading statements from management.
Stalking horse bid
Still, if it’s approved, Green Dot’s purchase of Wirecard’s Payment Services business could prove more pivotal. The German company’s money-making Open Platform is a major component of the transaction, and it has been open to being acquired by a bigger company, according to Recode. According to Recode, a unit of Green Dot was identified as the “best candidate” for the business.
As the “best-placed” bidder, Green Dot would get an exclusivity agreement that allows it to conduct due diligence and line up funding until the end of the third-quarter. The “stalking horse” bid also implies that an alternative “superior offer” for the business cannot be made.
A number of U.S. e-commerce companies have expressed interest in acquiring the business, including e-commerce company Iconix, Recode reported. Iconix could probably afford a purchase, as last year it raised $370 million in debt.
Brookings Institution senior fellow Andy Stern called on Treasurer Steven Mnuchin to investigate whether Green Dot’s stalking horse bid has circumvented the bidding process. While the company had informed investors it wouldn’t bid until the third quarter, Stern wrote in a letter to the Treasury secretary that this could be illegal.