Mogo to enter $4+ trillion Canadian Wealth Management Industry with acquisition of Leading Saving and Investing App, Moka Financial Technologies Inc.

Rhea-AI Summary

Mogo Inc. (NASDAQ:MOGO) has entered a binding letter of intent to acquire Moka Financial Technologies Inc. in an all-stock transaction valued at 5,000,000 Mogo shares and the assumption of $3 million in net debt. This acquisition is projected to boost Mogo’s member base by over 40%, reaching more than 1.7 million members. Moka, a popular Canadian app with over 500,000 active users, specializes in automatic savings and investments. The deal aims to enhance Mogo’s offerings, including launching a free stock trading solution, and is expected to close by Q2 2021, pending regulatory approval.

Positive

• Increase in member base by over 40% to 1.7 million.
• Expansion into the $4+ trillion wealth management market.
• Accelerated growth of subscription and transaction-based revenue.
• Addition of Moka's technology and experienced team to enhance Mogo's offerings.

Negative

• Assumption of approximately $3 million in net debt.
• Transaction subject to regulatory approval and court confirmation.

Mogo Inc. (NASDAQ:MOGO) (TSX:MOGO) (“Mogo” or the “Company”), a digital payments and financial technology company, today announced it has entered into a binding letter of intent to acquire 100% of Moka Financial Technologies Inc. (“Moka”), one of Canada's leading saving and investing apps, in an all-stock transaction. The proposed acquisition will increase Mogo’s member base by over 40% to more than 1.7 million and expand Mogo’s wealth offering to include saving and investing products. In addition, the acquisition will accelerate Mogo’s plan to launch a free stock trading solution for Canadians which will further solidify Mogo’s position as the most comprehensive digital wallet in Canada. The two companies expect to complete a definitive agreement and close the transaction in Q2 2021.

Montreal-based Moka launched in 2017 with the social mission to help millennials achieve their financial goals, and it has since been downloaded by over 1 million consumers and earned thousands of 5-star reviews. The Moka app has become one of Canada’s most popular investing apps due to its roundup feature, which automatically rounds up daily purchases and invests the spare change in personalized, diversified portfolios of low-cost Exchange-Traded Funds. Moka members can invest through a TFSA, RRSP or non-registered account. There is no financial knowledge, minimum investment or lifestyle change required to use Moka, so anyone can start saving and investing by downloading the app and simply linking an existing debit or credit card.

“This acquisition represents another significant milestone for Mogo on our journey to building the leading digital wallet for Canadians,” said David Feller, Mogo’s Founder and CEO. “Like Mogo, Moka is driven to help users improve their financial health, and they have built an innovative solution to enable consumers to easily save and invest money. By adding these digital saving and investing products – along with Moka’s technology platform and experienced fintech team – we will dramatically enhance what is already one of the most compelling and differentiated value propositions in Canadian finance. Moka will complement our existing MogoCrypto account and form the core of MogoWealth, making Mogo’s digital wallet the most comprehensive solution in Canada.”

Philip Barrar, Founder & CEO of Moka, added: “We’re very excited to join Mogo, a fintech pioneer and one of Canada’s leading fintech companies. 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 and, importantly, to give our members access to even more digital products and tools to improve their financial well-being. We look forward to bringing these two companies together.”

Greg Feller, President and CFO of Mogo, added: “This is a highly strategic acquisition for Mogo. In addition to adding capabilities in two large and important financial segments – saving and investing – we would immediately increase our member base by over 40%, accelerate the growth of our subscription & transaction-based revenue and increase Mogo’s total addressable market into the $4+ trillion wealth management business along with expansion into Quebec. Following the Moka acquisition, we expect to further expand the MogoWealth product offering in 2021, including introducing a free stock trading solution to Mogo members.”

Moka currently has more than 500,000 active members and over 100,000 monthly subscription members, and the company generated approximately $6.5 million of revenue in 2020. Moka has approximately $250 million of assets under management and registered portfolio management capabilities throughout Canada and in Europe, where the company launched in France during 2020. Moka’s key investors include Desjardins Capital, the venture capital arm of North America's largest association of credit unions, NAventures, the venture capital division of National Bank of Canada, and Ferst Capital Partners, a private investment firm that specializes in consumer fintech and digital assets.

Following completion of the acquisition, it is expected that Philip Barrar, Founder & CEO of Moka, will join Mogo’s leadership team in a newly created role of Chief Innovation Officer. Dr. Liam Cheung, Chairman of Moka and partner at Moka shareholder Tactico, is expected to join Mogo’s board of directors. Cheung is a seasoned financial services entrepreneur and executive with over 25 years of experience. Prior to founding Tactico, he was instrumental in successfully establishing several new businesses for several brokerage and trading technology companies worldwide. Cheung was instrumental in founding Fidelity Clearing Canada, which provides clearing, custody and back-office support services to Canadian-based brokerage firms and the Canadian brokerage arms of U.S.-based firms. Previously, he was closely involved with JitneyTrade where he served as Chairman, during which time the company became one of the top ten highest volume trading firms in Canada. JitneyTrade was eventually sold to Canaccord Genuity in 2018.

Transaction Overview
Pursuant to the binding letter of intent, Mogo has agreed to acquire all of the issued and outstanding shares of Moka in exchange for 5,000,000 common shares of Mogo (“Mogo Shares”) and the assumption of net debt of approximately $3.0 million (the “Acquisition”). The Acquisition is expected to be completed by way of a statutory plan of arrangement under the Canada Business Corporations Act whereby all of the issued and outstanding shares and convertible securities of Moka will be exchanged for Mogo Shares, which plan of arrangement will require court approval and the approval of the shareholders of Moka. Subject to further agreement of Mogo and Moka, the Acquisition may be structured as a business combination transaction other than a plan of arrangement (including, for greater certainty, a share exchange). The Acquisition is subject to regulatory approval, in addition to other customary closing conditions for a transaction of this nature, and is expected to close in the second quarter of 2021. The issuance of Mogo Shares under the Acquisition is subject to the approval of the Toronto Stock Exchange.

Moka’s senior management, board members, and key outside shareholders, representing more than two-thirds of Moka’s outstanding voting securities have entered into voting and support agreements agreeing to vote in favor of the Acquisition. All Mogo shares issued in the transaction will be subject to minimum six-month Escrow restrictions with additional escrow and vesting restrictions for certain Moka employees and shareholders.

Mogo and Moka intend to enter into a definitive arrangement agreement (the "Definitive Agreement") in the near future, which will set out the detailed terms of the acquisition. Full details of the acquisition will be included in the Definitive Agreement.

About Mogo
Mogo is empowering its more than one million members with simple digital solutions to help them get in control of their financial health. Through the Mogo app, consumers can access a digital spending account with Mogo Visa* Platinum Prepaid Card featuring automatic carbon offsetting, easily buy and sell bitcoin, and get free monthly credit score monitoring, ID fraud protection, and personal loans. Mogo’s wholly-owned subsidiary, Carta Worldwide, also

FAQ

What is the significance of Mogo's acquisition of Moka Financial Technologies?

The acquisition is significant as it will increase Mogo's member base by over 40% and expand its wealth management offerings.

How will the Moka acquisition impact Mogo's market position?

The acquisition is expected to solidify Mogo's position as a leading digital wallet provider and expand its total addressable market.

When is Mogo expected to finalize the acquisition of Moka?

The acquisition is expected to close in Q2 2021, pending regulatory approval.

What financial metrics does Moka bring to Mogo with this acquisition?

Moka has over 500,000 active members and generated approximately $6.5 million in revenue in 2020.

What is the structure of the acquisition deal between Mogo and Moka?

Mogo will acquire Moka for 5 million common shares and assume approximately $3 million in net debt.