MoneyGram offers to sell shares worth $100 million;share prices drop

Karthik Subramanian

MoneyGram International Inc. today announced that it was offering an At-The-Market program where it would offer and sell its own shares worth $100 million to repay some of its outstanding debts.

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BofA Securities would be the sales agent and the announcement said that it would make all efforts to sell such shares in a way that would not affect the share price and in a way that the level playing field is maintained for all shareholders and market participants in general. Normal sales and trade practices would be followed and the company said that this offer would be done only at prices that are laid down by the company and the company may choose not to sell any shares as well.

It has offered to sell shares for a total of $100 million but if the prices are not right, the company may choose not to sell or stop selling at any point in time. This exercise seems to be a way to liquidate some of the company stock to mop up some cash. The company has said that the funds raised in this manner would be used to repay debt under the First lien credit agreement and the Second Lien credit agreement made in June 2019 with Bank of America acting as the administrative agent for this transaction.

As expected, this announcement has led to a large drop in the share prices of MoneyGram with the prices dropping by over 8% during the course of trading in NASDAQ today. MoneyGram is one of the major players in the payments business and this offer should be a surprise for the shareholders as the company was expected to do well during the times of the pandemic with many people preferring to use digital methods for money transfers.

In fact, it was just last month that the company had reported massive growth in its online payments business and this offer to sell its shares when the going is good has naturally raised doubts among the shareholders. With this announcement, the share prices are expected to move even lower as many investors would be keen to dump the shares either to exit the stock or to try and buy it back lower when the company offers it. This is going to place a lot of pressure on MoneyGram to raise the funds that it needs to repay its debts and the investors would hope that this doesn’t become a downward spiral and this move down is arrested as soon as possible.

 

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