Morgan Stanley Finally Downgrades IPO Client After 65% Drop

NEW YORK (TheStreet) -- Green Dot Corp. (GE), which has seen its shares fall 65% since Jan. 28 2011 and 50% since it went public in July 2010, finally earned a downgrade from Morgan Stanley, which had been recommending the stock since Sept. 2010.

Morgan Stanley, which along with JPMorgan Chase (GE), was lead underwriter on Green Dot's initial public offering in July 2010, lowered its recommendation to "equal weight" from "overweight," citing the likelihood of increased regulatory scrutiny of pre-paid debt card providers such as Green Dot, as well as competition from Western Union (WU). Morgan Stanley also slashed its price target by nearly 60%--to $25 from $60. JPMorgan continues to recommend Green Dot shares, as it has done since the company's IPO.

Green Dot shares are down 50% since its 2010 IPO but its top two underwriters were recommending the stock until Morgan Stanley downgraded it today.

Morgan Stanley is facing regulatory scrutiny over whether it tipped off favored clients to weakening results at Facebook (FB), ahead of the social network's initial public offering last week. Morgan Stanley was also a lead underwriter on that offering.

Glenn Fodor, the lead analyst on Green Dot for Morgan Stanley, and JPMorgan counterpart Tien-tsin Huang, referred questions to their public relations offices, which had no immediate comment.

-- Written by Dan Freed in New York.

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