Takeover Offer Sends Unloved Penny Stock Soaring

MGI calls are popping in the options pits despite bearish analyst sentiment

Deputy Editor
Jun 2, 2020 at 11:04 AM
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One of the best stocks on the Nasdaq so far today is MoneyGram International Inc (NASDAQ:MGI), up 32.4% at $3.43 at last check. The big move from the penny stock comes after Bloomberg News reported on a possible takeover offer from money transfer rival Western Union (WU). Following the news, BTIG chimed in that the combination would be subject to a "lengthy U.S. antitrust review," with regulators studying their shares of the U.S.-to-Mexico market. 

Today's pop --set to be MGI's best single-session gain since June 18 -- has the stock in the $3.50 range for the first time since early November. The shares have gapped above resistance at their 200-day moving average that capped yesterday's gains, and are now up 168% for the quarter. 

Analysts sentiment toward MGI remains bearish, with all seven of the brokerages in coverage doling out "hold" or worse ratings. Plus, the 12-month consensus price target of $1 is a 70.2% discount to current levels, indicating there's ample room for upgrades and/or price-target hikes that could fuel additional gains down the road. 

Calls have ramped up in popularity today in the options pits. So far, over 6,200 calls and more than 1,000 puts have crossed the tape so far -- 14 and 49 times the average daily volume, respectively. Most popular is the June 4 call, where new positions are being opened. Buyers of these call are expecting more gains from the e-payment issue in the next two weeks.


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