All-stock deal valued at $64 million will see Mogo acquire Montreal-based Moka in exchange for five million Mogo shares and about $3 million in debt
Article content
Vancouver-based digital payments and lending company Mogo Finance Technology Inc. is buying Moka Financial Technologies Inc. to enter the money management business, the companies said Tuesday.
The all-stock deal valued at $64 million will see Mogo acquire Montreal-based Moka in exchange for five million Mogo shares and about $3 million in debt. The deal is expected to close by June.
Mogo, backed by former Dragons’ Den investor Michael Wekerle, said the purchase will boost its membership by 40 per cent to more than 1.7 million members and accelerate its plan to launch a free stock trading app.
“We are increasingly positioning ourselves to help the next generation of Canadians manage their financial lives through a completely digital experience,” Mogo president and chief financial officer Greg Feller said in an interview. “A critical piece that was missing was the savings and investing portion.”
Advertisement
This advertisement has not loaded yet, but your article continues below.
Article content
The deal positions Mogo as a disruptor in the wealth management industry, where Canadians have an estimated $4 trillion invested. Moka’s shareholders include National Bank of Canada and Montreal-based private-equity investors Ferst Capital Partners and Desjardins Capital Inc.
The Moka deal continues Mogo’s recent buying spree. In November, it bought Carta Solutions Holding Corp. to boost its business-to-business payments capability, and it’s investing $27 million this year in Canadian cryptocurrency company Coinsquare, using part of a $82-million war chest for acquisitions, Feller said. The new stock trading app is due by year’s end, he said.
“We’re going to have a substantial balance sheet to continue to look for transactions to accelerate our product road map,” said Feller, who co-founded Mogo in 2003 with his twin brother, David, the chief executive. “You can’t just rely solely on internal development.”
Moka began in 2017 by targeting millennials with an investing app that amassed pennies to buy exchange-traded funds. The app kept track of daily household purchases, then rounded up the expenses to invest the extra amounts in personalized portfolios.
“Moka has built a robust customer-centric technology platform and, as part of a larger, more diversified and well-capitalized digital platform, we enhance the opportunity to grow our business,” said Moka founder and chief executive Philip Barrar, who will become Mogo’s first chief innovation officer.
Advertisement
This advertisement has not loaded yet, but your article continues below.
Article content
Shares in Mogo were up 3.6 per cent to $13.34 in trading Tuesday on the TSX. The stock gained 3.3 per cent on Nasdaq.
Postmedia Network Canada Corp., which owns the Financial Post, holds equity warrants in Mogo as part of a business collaboration.
Also Tuesday, Mogo posted a net loss that widened to $13.4 million in the 12 months ended Dec. 31, compared with $10.8 million in 2019.
Adjusted earnings before interest tax, depreciation and amortization increased to $11.6 million on revenue of $44.2 million, compared with $7.2 million from $59.8 million, respectively, in 2019. Lower revenue last year followed the sale of part of Mogo’s loan portfolio and reduced lending in light of COVID-19, the company said.
“We haven’t set a target of when we’re looking to be long-term profitable,” Feller said. “But we know we’ve got the model and it just depends on what stage you want to dial back the growth investment and focus more on profit and cash flow.”
Financial Post
