MoneyGram International Shares Plunged: What You Need to Know

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of payment service provider MoneyGram International (NYS: MGI) are getting shortchanged today, down by as much as 11% after the company announced a reverse stock split and secondary offering.

So what: The company will be doing a 1-for-8 reverse stock split, reducing the number of outstanding shares from roughly 398.7 million to about 49.8 million. The secondary offering will include 11.25 million shares of common stock to be sold, with the underwriters having the option to purchase approximately 1.7 million additional shares.

Now what: Reverse splits tend to have negative connotations, as they're seen as an artificial way to prop up a stock's share price. As negative as those associations are, secondary offerings get an even worse rap, since they're typically dilutive and usually a sign that the company needs cash. In this offering, MoneyGram isn't receiving any proceeds from the offering, and isn't issuing dilutive stock. While today's announcements certainly aren't good news, it's not as bad as it seems.

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At the time thisarticle was published Fool contributorEvan Niuholds no position in any company mentioned.Click hereto see his holdings and a short bio. Try any of our Foolish newsletter servicesfree for 30 days. We Fools may not all hold the same opinions, but we all believe thatconsidering a diverse range of insightsmakes us better investors. The Motley Fool has adisclosure policy.

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