Please ensure Javascript is enabled for purposes of website accessibility

Why MoneyGram International Stock Sank Today

By Joe Tenebruso – Updated Jun 19, 2019 at 5:39PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Shares pulled back sharply following Tuesday's torrid gains.

What happened

Shares of MoneyGram International (MGI) plunged nearly 25% on Wednesday. The decline came one day after the money transfer company surged 168% on news of a deal with cryptocurrency giant Ripple. 

So what

On Tuesday, MoneyGram stock soared following news that it had entered into a strategic partnership with Ripple. The blockchain company is investing $30 million in MoneyGram in exchange for an equity stake. Ripple also has the option to invest another $20 million to boost its stake in the future.  

Notably, Ripple is buying the stock at $4.10 per share. It closed at only $1.45 on Monday, before news of the deal broke. 

As part of the deal, Ripple will become MoneyGram's key partner for cross-border settlement. MoneyGram will use Ripple's xRapid product, which leverages its controversial XRP digital token in foreign exchange settlement. 

Now what

The XRP token's key features include low transaction fees and ultra-fast transaction speeds. Yet the company has struggled to gain wide adoption for its cryptocurrency among banks and payments firms. The partnership with MoneyGram is no doubt geared toward proving XRP's utility and effectiveness in real-world operations. Should MoneyGram recognize the benefits that Ripple claims, it could go a long way toward highlighting XRP's value.

A downwardly sloping line drawn over an erased upwardly sloping line

Image source: Getty Images.

As for MoneyGram's decline on Wednesday, it may simply be a case of profit-taking after Tuesday's massive gains. It could also be related to Facebook's blockbuster announcement of its new payments-focused cryptocurrency, which could become a formidable new rival to Ripple's products.

One thing is certain: Competition is intensifying in digital payments.

Companies that are able to adapt their business models and implement disruptive new technologies like cryptocurrency stand to benefit, while those that don't will likely be left behind. Whether MoneyGram can continue to compete effectively in this rapidly changing world remains to be seen.

Joe Tenebruso has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.