Feb 12, 2021
Wekerle-backed fintech firm Mogo surges on crypto exchange deal
, Bloomberg News
Mogo Inc. shares extended their rally after buying a stake in a cryptocurrency exchange, deepening the company’s exposure to Bitcoin.
Vancouver-based Mogo announced a deal to buy just under 20 per cent of Coinsquare Ltd. for about $56.4 million (US$44.5 million) on Thursday, with the option to buy an additional 20 per cent via share purchases and exercising of warrants. The deal is expected to close during the first quarter.
Mogo rose 2.7 per cent to $12.14 as of 12:45 p.m. on Friday, bringing its gain for the week to 70 per cent. It touched $15 on Tuesday.
Difference Capital Financial Inc., a venture firm co-founded by former Bay Street trader Michael Wekerle, merged with Mogo in 2019 through a share swap. Wekerle is a director and the top shareholder of Mogo, owning about 12.4 per cent of the shares outstanding, according to data compiled by Bloomberg. That stake is now worth about $64 million.
Coinsquare acts as the trading platform for MogoCrypto, a service Mogo launched in 2018 to allow its users to buy and sell Bitcoin. Coinsquare grew to more than $525 million in trading volume for January, and has more $500 million in assets under management as of Feb. 9, according to Mogo’s statement.
Mogo’s deal “more firmly ties the company to the surge in Bitcoin popularity and activity,” Doug Taylor, a Toronto-based analyst at Canaccord Genuity, said in a note to clients.
Bitcoin trading revenue represents about 10 per cent of Mogo’s overall revenue, Taylor estimates. He downgraded Mogo to a hold recommendation from a speculative buy after the share run, boosting its price target to $13 from $6.
Analysts at Eight Capital stayed bullish, maintaining a buy rating and boosting Mogo’s price target to a Street high of $16, from $10. The deal “future proofs Mogo as Bitcoin continues to see greater mainstream acceptance and becomes a more material part of their business,” analyst Suthan Sukumar wrote in a note to clients.
Bitcoin, the world’s largest digital asset, was trading at nearly US$48,000 as of 12:59 p.m. on Friday afternoon.
