Green Dot Shares Plunged: What You Need to Know

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Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of prepaid card issuer Green Dot (Nasdaq: GDOT  ) slid as much as 11% in intraday trading today as investors reacted to the company's secondary stock offering.

So what: Back in July, Green Dot hit the public markets with its initial public offering. Normally, when a company goes public, it sells newly issued shares to the public so that the company has a pile of fresh capital to invest in the business. Sometimes insiders will also sell some of their shares. In the case of Green Dot, the IPO was entirely insiders selling, with no new capital going to the company. After yesterday's close, the company announced the pricing of a secondary stock offering, which represented another 4.3 million shares being sold by insiders. It seems pretty understandable that investors are skittish after the offering -- if insiders are in such a hurry to get to the exits, why should public-market investors rush in?

Now what: Green Dot is in the perfect business for our post-recessionary economy -- prepaid debit cards that it distributes through retailers such as Wal-Mart, Rite Aid (NYSE: RAD  ) , and Kroger (NYSE: KR  ) . Wal-Mart also owns a substantial stake in the company. I'm rarely a fan of buying IPOs because Wall Street is always busy whipping up excitement around them and as a result they tend to get frothy and overvalued -- which looks like it could be the case at Green Dot. This could be an interesting stock to have on the radar, but I'd let the dust settle a bit here before trying to chase it.

Want to keep up to date on Green Dot? Add it to your watchlist.

Wal-Mart Stores is a Motley Fool Inside Value selection. Wal-Mart Stores is a Motley Fool Global Gains pick. The Fool owns shares of Wal-Mart Stores. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

Fool contributor Matt Koppenheffer owns shares of Wal-Mart, but does not own shares of any of the other companies mentioned. You can check out what Matt is keeping an eye on by visiting his CAPS portfolio, or you can follow Matt on Twitter @KoppTheFool or on his RSS feed. The Fool's disclosure policy assures you no Wookiees were harmed in the making of this article.

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