BusinessWeek reports that the stock price of the second largest tax preparation company, Jackson Hewitt Tax Service Inc., plunged 23 percent, the worst on the New York Stock Exchange, after its bank partner cut off funds for tax refund loans:
Jackson Hewitt, the No. 2 tax preparer behind H&R Block Inc., dropped $1.34 to $4.50 at 1:01 p.m. in New York Stock Exchange composite trading, and sold for as little as $4.30. The stock fell 71 percent in 2009. H&R Block added 3.7 percent to $21.59.
The fall was precipitated by Jackson Hewitt’s loss of funding for Refund Anticipation Loans (RALs):
Regulators ordered Santa Barbara Bank & Trust to stop providing money, which covered about 75 percent of Jackson Hewitt’s financial products program, according to a federal filing today by the Parsippany, New Jersey-based tax preparer
Tax preparers are locked in a battle for customers, with Jackson Hewitt vowing earlier this month to regain market share from H&R Block. Firms attract clients with refund-anticipation loans, or RALs, in which customers who need cash immediately can get a short-term loan, typically lasting a few weeks, that’s based on the expected amount of their tax refund.
Jackson Hewitt, with 6,600 outlets and almost 3 million clients, has been losing customers to Kansas City, Missouri- based H&R Block and Intuit Inc., which makes TurboTax software. It suspended its dividend in March and has hired Goldman Sachs Group Inc. to explore “strategic alternatives,” language that typically means a company may be sold.
Messages left with Jackson Hewitt spokeswoman Sheila Cort weren’t returned.