Shares of prepaid debit card company Green Dot Corp. (NYSE: GDOT) rose sharply in its market debut last Thursday, as investors bet that its relationships with top retailers would pay off.

Shares of Green Dot closed at $43.99, 22.2% above its IPO price.

“The IPO market is improving for companies that dominate their markets and have good topline revenue growth and are profitable,” said IPOdesktop.com President Francis Gaskins.

“Green Dot has a lock on the big retailers.”

Venture shareholders include Sequoia Capital (with a 31.9% pre-IPO stake) and Total Technology Partners (10.8%).

Monrovia, Calif.-based Green Dot, which has agreements with Wal-Mart Stores Inc., Walgreen Co. and 7-Eleven, is the top player in the U.S. prepaid debit card industry. The company relies heavily on Wal-Mart, which accounted for 63% of its total operating revenue in the quarter ended March 31.

Analysts say Green Dot needs to reduce its reliance on the discount retailer, which recently renewed its contract with Green Dot until 2015. Wal-Mart also took a minority stake in Green Dot as part of that deal.

But the prepaid company is “completely free” to pursue partnerships with Wal-Mart’s competitors, Green Dot CEO Steve Streit said in an interview last week.

“They know that we’re sold in many other retailers … and we’re always looking for new partnerships and new expansion opportunities,” he said.

Green Dot sells prepaid debit cards to young, low-income consumers. Such consumers typically rely on cash and do not have much access to credit.

The market for such cards is growing. Research firm Mercator Advisory Group has predicted that Americans will load as much as $118.5 billion onto prepaid cards by 2012, compared with $8.7 billion they put onto such cards in 2008.

Green Dot is exempt from a provision in the financial regulation bill which will restrict debit processing transaction fees, known as “interchange fees,” that banks receive from merchants.

The exemption will give the company a competitive advantage, which Streit expects to enjoy for the foreseeable future.

“Now it’s part of a landmark financial regulation bill that I don’t think is going to grow stale in a week,” he said. “That bill will be in place for many years to come, and it’s unlikely that debit card interchange in and of itself will be revisited again.”

The company sold 4.56 million shares for $36 each, raising about $164 million. It had planned to sell 4.17 million shares for $32 to $35 each. —Clare Baldwin, Reuters