Ripple Inc., a startup behind the XRP cryptocurrency, agreed to invest up to $50 million in MoneyGram International Inc. in a deal that stands among the first of its kind where a crypto-based company invests in a major U.S. publicly listed firm.
Ripple agreed to buy $30 million worth of MoneyGram shares and warrants to buy stock at $4.10 a share, nearly triple the Monday closing price of $1.45 a share. The deal includes additional warrants for up to $20 million worth of additional newly issued stock, also at $4.10 a share, over the next two years at MoneyGram’s discretion.
The two companies signed a two-year agreement for MoneyGram to use XRP and a platform for XRP transfers called xRapid as a back-office channel for managing its settlement operations. The two companies began working together in 2018 when MoneyGram agreed to run a pilot program testing XRP. Today’s deal is an extension of that initial program.
“This deal is a major milestone for the entire industry,” said Brad Garlinghouse, Ripple’s chief executive.
Previously, MoneyGram has used foreign exchange markets for settlements, which means the company routinely has to buy currencies ahead of time. The company expects to lower its operating costs and the amount of working capital it needs to set aside by switching to XRP, which it also expects will result in improved earnings and free cash flow.
MoneyGram’s customers will continue to use local currencies and won’t see any difference in the service.
MoneyGram is the second-largest company in the global remittances market, behind leader Western Union , but has struggled lately. It had an agreement to sell itself to China’s Ant Financial Services Group in 2017, a deal that carried a $1.2 billion price tag. It was blocked by the Trump administration early in 2018.
MoneyGram shares have fallen sharply since a disappointing first-quarter earnings report last month. They are down about 56% since then.
The initial deal would give Ripple about a 10% stake in MoneyGram. It won’t have a board seat, but will be an “observer,” Mr. Garlinghouse said. The company’s largest shareholder is Thomas H. Lee Partners, which owns about 42% of the company.
It is not the largest deal Ripple’s undertaken but is the largest company in which it has invested—and the first time it has invested in a publicly traded company.