The stock price of MoneyGram has skyrocketed, up from $1.45 to $3.04 with it reaching at one point as much as $3.70.
Trading opened today with a huge jump, doubling its price and adding $80 million to MoneyGram’s market cap while Western Union fell 2%.
This jump follows the announcement of a partnership with Ripple, the company behind XRP. Alex Holmes, MoneyGram Chairman and CEO, said:
“Through Ripple’s xRapid product, we will have the ability to instantly settle funds from US dollars to destination currencies on a 24/7 basis, which has the potential to revolutionize our operations and dramatically streamline our global liquidity management.”
Ripple is to pay $4.10 per share to acquire 8% to 10% of MoneyGram, close to 4x more than the trading price before the announcement.
That makes it a $30 million investment in the century old company which operates in more than 200 countries with a global network of about 347,000 agent offices.
MoneyGram further has the option of another $20 million cash infusion for the next two years. Ripple CEO Brad Garlinghouse said:
“This will eliminate the need to deploy foreign bank accounts. That’s why MoneyGram has negative working capital. It will help customers and also smooth out their treasury operations.”
MoneyGram’s specialization in international money transfers can potentially showcase xRapid which bypasses correspondent banking.
This can work with any crypto, with the process at a high level somewhat simple and straight forward.
You basically send your dollars from your account to a crypto exchange. You then buy XRP in this case, but in general you can buy bitcoin or eth or any crypto. Then you send the crypto to a local exchange say in South Africa or in Argentina. There you sell it for South African ZAR or Argentinian ARS, and so withdraw it to your South African or Argentinian bank account. Then obviously you give the money to the customer.
So then the process here is changed from going through intermediary banks and clearing houses and days of paperwork, to just going from the exchange – which presumably uses a local bank – to your local bank.
This works in general and does save costs and it is quicker with international transfers one of the most prominent use case for cryptos.
In a partnership with MoneyGram, that can potentially be a game changer because they have so many kiosks almost everywhere.
Ripple’s price, however, has not reacted very much, up just 1%, presumably because the market thinks they’ve way overpaid.
Ripple has been selling hundreds of millions worth of XRP every quarter, with the for profit entity flush with cash. All that comes from investors, of course, and judging by the price reaction they don’t seem very happy.
While for MoneyGram, not only have they gotten close to 4x more than the spot price, but they can also now appear a bit more modern.