Mogo announces strategic investment in coinsquare, Canada’s leading digital asset trading platform
By Reshma on Feb 15, 2021 | 04:35 AM IST
Mogo
Inc. (NASDAQ:MOGO) (TSX:MOGO) (“Mogo” or the
“Company”), a digital payments and financial technology company, today
announced its investment in Coinsquare Ltd. (“Coinsquare”), Canada’s leading
digital asset trading platform, including the execution of a definitive
agreement (the “Agreement”) for Mogo to acquire 19.99% ownership of
Coinsquare’s outstanding common shares on a post-transaction basis for total
consideration of approximately $56.4 million. The Agreement also includes
rights for Mogo to acquire an additional 20% ownership interest in Coinsquare
through purchases of shares from current shareholders and the exercise of
warrants under certain conditions (refer to “Terms of the Transaction”), for
consideration based on a pre-money valuation of Coinsquare ranging from
$250-350 million. This strategic investment builds on a multi-year relationship
between the two companies. Coinsquare acts as the trading platform for
MogoCrypto, a service Mogo launched in 2018 to allow its members an easy and
convenient way to buy and sell bitcoin.
Launched
in 2014, Coinsquare has grown to become the leading digital asset trading
platform in Canada, with trading volume in excess of $525 million in January
2021. Coinsquare provides digital asset traders with a proprietary trading
platform engineered to deliver a robust, secure, and user-friendly interface
for trading Bitcoin, Ethereum and other digital assets. The trading platform
makes buying and selling digital assets quick and convenient, with customers
able to easily manage their portfolio of digital assets. Coinsquare’s
subsidiary, Coinsquare Capital Markets Ltd. (CCML) also recently submitted a
dealer membership application to the Investment Industry Regulatory
Organization of Canada (IIROC) and an application to the Ontario Securities
Commission (OSC) to operate a marketplace for digital assets.
Management Commentary:
“We believe strongly in the growing
importance of cryptocurrency in the financial wallets of consumers, and
deepening our relationship with Coinsquare will enable us to bring enhanced
functionality and value into the MogoCrypto product” said David Feller, CEO of
Mogo. “We’ve had a relationship with Coinsquare for nearly three years and
built strong familiarity with their team and platform, which we view as the most
robust trading platform in Canada for digital assets.”
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Greg Feller, President of Mogo,
added: “This major strategic transaction with Coinsquare gives us a significant
stake in a highly valuable platform in one of the most exciting and fastest
growing sectors of fintech. We believe there are significant opportunities to
drive value for both Mogo and Coinsquare by bringing together Mogo’s leading
digital wallet capabilities and Coinsquare’s leading digital trading platform.”
Jason Theofilos, Board Member of
Coinsquare, commented: “We’re excited to deepen our relationship with Canada’s
leading fintech company. By leveraging Mogo’s digital wallet capabilities and
base of more than one million members, combined with our deep crypto trading
capabilities, we see significant opportunities to accelerate the growth of both
businesses.”
Terms of the Transaction
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Mogo will
initially acquire 19.99% of the outstanding common shares of Coinsquare on a
post-transaction basis (the “Initial Investment”) by way of treasury issuance
and purchases of shares from current shareholders for total consideration of
$56.4 million (the “Purchase Price”). Under the Agreement, Mogo has a right
to satisfy the Purchase Price for the Initial Investment in a combination of
cash and a minimum of 1,956,457 common shares of Mogo (“Mogo Shares”). Any
additional Mogo Shares to be issued by Mogo in satisfaction of the Purchase
Price will be issued at a 15% discount to the market price of the Mogo Shares
as of the close of trading on February 10, 2021, subject to minimum pricing
rules of the Toronto Stock Exchange (“TSX”). |
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At the
Initial Closing, Coinsquare will issue to Mogo a warrant to acquire up to an
additional 10% of the outstanding common shares of Coinsquare on a
post-transaction basis. The warrant will become exercisable upon satisfaction
of certain conditions, and the exercise price payable for the Coinsquare
common shares may be satisfied through a combination of cash and Mogo Shares. |
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Mogo also
has an option to acquire, and certain existing shareholders of Coinsquare
have a right to require Mogo to purchase, an additional 10% of the
outstanding common shares of Coinsquare within 13 months of the Initial
Investment, subject to certain conditions. |
Under the terms of the Agreement,
Mogo has the ability to acquire up to 40% of the common shares of Coinsquare as
follows:
Following closing of the Initial
Investment, Mogo will be granted a right to appoint one nominee to the
Coinsquare board of directors, which may be increased to two nominees under
certain conditions. Coinsquare will have a right to appoint one nominee to the
Mogo board of directors. As part of the Initial Investment, Mogo will enter
into a unanimous shareholders agreement with all of the shareholders of Coinsquare,
which will provide certain rights and restrictions customary for an investment
of this nature.
The Agreement is subject to
regulatory approvals, including the approval of the TSX, in addition to other
customary closing conditions, and is expected to close in the first quarter of
2021.