TSS Total System Services

When Dan Henry read an activist investor's attack on Green Dot Corp., his former top rival in the prepaid card business, he offered to help.

Help the activist, that is.

Mr. Henry, the former chief executive of NetSpend, has emerged as a leading candidate for the top job at Green Dot if hedge fund Harvest Capital Strategies LLC manages to oust founder and CEO Steven Streit at a shareholder meeting later this month.

"I was really unaware of how abysmal the performance of Green Dot had been until I read the Harvest letters," said Mr. Henry, who bought $500,000 worth of Green Dot stock after Harvest launched its campaign.

Green Dot said Harvest's plans would stunt the company's growth. "Mr. Streit is the right leader for Green Dot," the company said in a presentation Friday. The company declined to make Mr. Streit available for comment.

Harvest went public with its Green Dot campaign in January after a series of disappointing earnings reports battered the company's stock. The hedge fund, which owns a 9.3% stake in Green Dot, said the company is squandering its leading position in prepaid cards and has held up NetSpend's growth as a model. Mr. Henry is the fund's top choice to replace Mr. Streit, according to people familiar with the matter.

Activists investors often team up with prominent industry executives to give shareholders a clear choice between two different leadership slates. But Mr. Henry and Harvest aren't formally working together as a team. He isn't among the fund's three board nominees—the former NetSpend CFO is—and Harvest has only said in documents several candidates are interested in the CEO job.

That is because Mr. Henry, who left NetSpend in 2014, is still tied to the company through a noncompete clause that expires in August. As a result, Mr. Henry's candidacy resembles something of a whisper campaign, with investors and analysts talking up Green Dot's one-time foe and the company taking veiled shots.

Green Dot and NetSpend are the two leading U.S. issuers of prepaid cards, a fast-growing and increasingly competitive segment of the market to serve "underbanked" consumers that can't access traditional financial products. Americans are expected to load $651 billion on such cards this year, up 57% from six years ago, according to consulting firm Mercator Advisory Group.

Green Dot, which has a market value of $1.2 billion and takes credit for inventing the prepaid card in 1999, sells branded cards at retail locations such as Wal-Mart Stores Inc.

Harvest has raised concerns about Green Dot's spending and lack of bottom-line growth. Since 2010, Green Dot's revenue has more than doubled to nearly $700 million, while profit is up 17% to $38.4 million.

Green Dot, in response, has questioned the qualifications of Harvest's nominees, and it said the fund hasn't offered a plan to expand the company.

Green Dot added three new directors, who won't be up for election this year, and has restructured Mr. Streit's compensation. Its shares are up 42% this year, and first-quarter results surpassed Wall Street expectations.

On an earnings call last week, Mr. Streit, unprompted, took aim at NetSpend, saying it is likely in the crosshairs of regulators and consumer advocates. An accompanying presentation argued NetSpend's business would be more affected than Green Dot's by looming Consumer Financial Protection Bureau regulations.

"If NetSpend was still a stand-alone company, do you really think that today you'd rather own shares in NetSpend than Green Dot?" Mr. Streit asked.

Both companies went public in 2010. When it was sold to Total System Services Inc. in 2013 for $1.4 billion, NetSpend shares were worth 46% more than the initial public offering price. Green Dot currently trades about 47% below its IPO price, which the company blames on a "lofty" valuation at the time of the offering.

Mr. Henry's name has been circulating among investors and analysts in recent weeks. SunTrust Robinson Humphrey's Andrew Jeffrey wrote in a research report last week he thought Mr. Henry would become involved if Harvest were to win, adding he would view that favorably.

"Dan Henry would be awesome," said one Green Dot top-10 shareholder when asked who could replace Mr. Streit as CEO.

For now, Mr. Henry is biding his time in semiretirement, he said while he whittled away in his woodworking shop in Kansas City crafting a high school graduation gift for his son.

While he avoided saying he wants the job, Mr. Henry was critical of Green Dot's current CEO. He said he would sell his Green Dot shares if Harvest's campaign to oust Mr. Streit fails.

"We've never personally come to words, but his leadership and management style is the antithesis of mine," Mr. Henry said. "I just don't see eye to eye with the guy on many fronts."

Write to David Benoit at david.benoit@wsj.com

(END) Dow Jones Newswires

May 10, 2016 10:35 ET (14:35 GMT)

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