It’s a big day for MoneyGram [NASDAQ: MGI]. In after hours trading, the company announced that blockchain company ripple was investing up to $50 million in its stock. Under the deal, Ripple has agreed to buy $30 million of new MoneyGram shares at $4.1. Ripple also has the right to buy another $20 million worth of stock, or warrants, at any point in the future. The deal will also see the company integrate XRapid into its systems. This is a big deal for MoneyGram because; it will significantly cut on its cross-border transfer costs.
XRapid is a cross border payments system by ripple that uses the crypto currency XRP (XRP) for payments. This allows for instant money transfer to any location across the world, and without the charges that come with using 3rd party banking systems for settlements. In essence, by using XRP (XRP) for settlements, MoneyGram can increase its competitiveness in the market, a move that could reflect in its future revenues.
Prior to the deal, the company’s stock had lost over 80% of its value. This happened after U.S regulators blocked a deal that would have seen it get sold to an Alibaba linked company. Besides, this setback from regulators, the company has been servicing about a $900 million debt.
MoneyGram intends to use the money received from this deal to refinance its debt. This means that after this deal, it will look to stand in a better position, in terms of liquidity. This factor could play a role in strengthening its financial standing going into the future. That is besides its improved competitive position once it integrates XRapid into its systems.
More short-term, MoneyGram has entered bullish territory after the Ripple deal. If it opens Tuesday’s trading at its current pre-market price, it will have broken the 200-day MA support at $2.96 on the daily chart. This bullish sentiment could possibly sustain all through the day. Blockchain technology is a big deal, and is set to revolutionize the financial services industry. In essence, the fact that MoneyGram has taken the reap in that direction could see sentiment remain bullish when markets open.
Things might be starting to look much better for MoneyGram now that it has adopted blockchain technology. Remember, to always keep an eye on the charts as they tell the true story of the stock.