Ripple Labs Inc. is selling about one-third of its stake in Moneygram for the first time. The company had bought Moneygram shares at a price of $4.10 in 2019 and is now trading above $7 on Nasdaq Stock Exchange. It had touched a low of $2.06 in January this year and bounced back strongly to perform 260% YTD.
$30 million profits
With the sale, Ripple is all set to make about $30 million profit, and the gains are more than 50% on their investment in about a year. According to market reports, the sale is still in process. The company spokesperson said that this was an excellent way to realize the gains on their international investment. The company added that this was not reflective of their current state of partnership with Moneygram.
Ripple owns 8.6% stake in Moneygram
After the sale, Ripple will now be having 8.6% stake in Moneygram, and this also comes with an option to buy additional 5.96 million shares under a warrant at a later date. Currently, Ripple holds about 6.24 million shares as the sale is not yet finalized. If the company decides to buy Moneygram shares later, Ripple can get about 11% stake in Moneygram in the future. This is a good strategy by the company as they have realized some profits, and they can wait further to see if there is good growth in Moneygram shares. When the time is right, they can either encash on their investments or invest further by purchasing more shares.
The current sale by Ripple will offload 4 million shares, and the process is in progress. The company still has about 3% shares, and they can take it to around 11% in the future when they use the additional warrant shares.
Ripple officials have said that they have no plans to exit Moneygram completely, and they have made good progress in just one year of association with the company. They also said that Ripple was looking forward to working with Moneygram to improve cross-border payments.
In November 2019, Ripple completed a $50 million investment in Moneygram and bought the shares at a premium price close to $4.10. Even though the price of Moneygram fell to about $2 shortly after the purchase in January 2020, it managed to recover completely and gave huge returns during the economic slowdown. Ripple has made a good deal in this regard, and they are likely to continue the partnership, according to market experts. In this way, Moneygram will also benefit in the long run with the Ripple settlement network.