MoneyGram stock dives nearly 50% to new low

For shareholders of MoneyGram International Inc., there is something worse than discovering the company just lost $860 million in bad bets on securities backed by subprime mortgages.

The realization that they likely will lose millions more.

Shares of the St. Louis Park-based money-transfer company tumbled nearly 50 percent to an all-time low after the company said it expects to record "significant" additional losses and that it will change its official check business, resulting in the loss of some of its biggest customers.

The stock closed Tuesday at $6.15 a share, down from as high as $30 last July.

The company said late Monday night that it may sell up to a 65 percent stake to an investment group led by private equity firm Thomas H. Lee Partners. But the proposed deal, which amounts to a bailout of MoneyGram, may not go ahead if the company suffers additional losses -- a possibility that some analysts and large shareholders consider likely.

"Knowing what we know now, we clearly wish that we had not purchased these securities," Philip Milne, chairman and chief executive of MoneyGram, said in a written statement. "But hindsight only allows us to see the past, not change it."

Yet Milne's pledge to focus on the future failed to appease investors, largely because MoneyGram's future is so uncertain.

MoneyGram also said it is seeking additional capital so it can realign its portfolio away from asset-backed securities and into more liquid assets. The new portfolio would primarily consist of government, agency and municipal securities, which are safer but offer a lower return. The company added that it is performing a year-end review of its portfolio, which likely will result in "significant additional losses" for December and a "substantial" fourth-quarter charge.

A competitor's overtures

Adding to this uncertainty is the possibility that a competitor may launch a second bid. In December, Euronet Worldwide Inc. made an unsolicited offer to buy MoneyGram for $1.65 billion in stock, or $20 a share. MoneyGram said it was willing to talk only if Euronet would sign a so-called "standstill" agreement, meaning it would stop pursuing its offer. Euronet declined, and the deal never occurred.

Now, Euronet is back in the mix. MoneyGram said Monday that it entered into a confidentiality agreement with Euronet and is talking with the company. A spokeswoman for Euronet confirmed that the company had "a brief discussion" with MoneyGram, but she declined to comment further.

The lack of clarity regarding MoneyGram's future is unnerving some analysts and large shareholders, who believe the company should have moved more quickly to disclose its problems and sell the business.