Why Voyager Stock Dropped 11% Yesterday

Voyager Digital (TSX:VOYG) saw shares fall up to 10.8% after news that a lawsuit alleging hidden fees would be moving forward for the cryptocurrency stock.

Amy Legate-Wolfe

Amy became interested in investing in 2018 after having her first daughter. After receiving a masters degree in journalism from Western University, she became frustrated that the finance industry remained a confusing place for Canadians like her: new parents, millennials, and other young people who needed to understand their finances. Now, Amy focuses on tech companies and renewable energy for growth opportunities, coupling that with long-term investing strategies and equities. She also provides investors with a daily newsletter, Canada Stock Digest, for daily market updates. Before joining Motley Fool Canada, she wrote for major news organizations including HuffPost, CTVNews.ca, and CBC. When she’s not researching investing strategies, Amy’s time is pretty much monopolized by her two wild daughters, but in what little spare time she has she loves to do yoga, go on walks with her dog, and travel with her husband. Follow Amy on LinkedIn and Canada Stock Digest. Favorite Investment Quote: “October: This is one of the particularly dangerous months to speculate in stocks. The others are July, January, September, April, November, May, March, June, December, August and February.” – Mark Twain

Published January 5, 2022 8:25 am EST

Cryptocurrency asset brokerage firm Voyager Digital (TSX:VOYG) saw shares drop as much as 10.8% on Tuesday. This came after a report came forward stating the company misled customers, with hidden fees adding up.

What happened?

Shares of Voyager fell sharply, ending the day down by 9% on Jan. 4 when the news hit. Investors already skeptical about cryptocurrency dumped it like a fire ball. Yet it comes after a string of successes for the company, including strong acquisitions and its own token.

Chief communications officer of Voyager Michael Legg responded to the allegations, stating they were without merit. The company offers 100% commission-free transactions, yet it may be able to hide it by showing a bid-ask spread. This is where it shows how much the transaction could cost depending on when you buy shares.

Therefore, it hides the fee within the transaction, seeming to simply be the share price you purchased. Voyager is known for a wide bid-ask spread, which led to the original suspicions.

So what?

The news could seriously hurt Voyager. The lawsuit means not only could it lose customers should the allegations be true. It would also deter future customers from seeking out Voyager, knowing there are now fees involved.

Instead, Voyager may be seen as just another broker rather than an exchange. And frankly, there are likely better options out there to consider — especially if Voyager has fees involved.

But it gets worse. The lawsuit could result in over $1 billion in compensation for Voyager — money that the company seriously cannot afford.

Now what?

Voyager is a volatile stock in a volatile market. Cryptocurrency has already become shaky over the last few months. But what’s worse, the company was already not the top broker or exchange. Sure, it has some solid business moves. However, there seems to be better options.

Therefore, it’s definitely a time that I would step back from the crypto stock to at least see how the lawsuit shakes out. Should the allegations prove true, Voyager may crash and burn in the very near future.