Mogo (MOGO.T) climbs deeper into cryptocurrency with Coinsquare investment

Mogo (MOGO.T) invested in Canadian digital asset trading platform, Coinsquare, earlier this week, including a definitive agreement to acquire 19.99% of the company for $56.4 million, according to a press release.

The investment is part of a multi-year relationship between the two companies, and has Coinsquare acting as a trading place for MogoCrypto, Mogo’s bitcoin marketplace.

“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. 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,” said David Feller, CEO of Mogo.

Coinsquare’s been around since 2014, and since grown to become one of the largest digital asset platforms in Canada with a trading volume over $525 million in January 2021. They have a secure and user friendly interace for Bitcoin, Ethereum, Litecoin and other cryptos. Their subsidiary, Coinsquare Capital Markets recently submitted a dealer membership application to the Investment Industry Regulatory Organization of Canada (IIROC) and the Ontario Securities Commission (OSC) to be able to operate their marketplace for digital assets.

Transaction terms:

Mogo can acquire to 40 per cent of the common shares of Coinsquare as follows:

Mogo will initially acquire 19.99 per cent of the outstanding common shares of Coinsquare on a posttransaction basis by way of treasury issuance and purchases of shares from current shareholders for total consideration of $56.4-million. 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. Any additional Mogo shares to be issued by Mogo in satisfaction of the purchase price will be issued at a 15-per-cent discount to the market price of the Mogo shares as of the close of trading on Feb. 10, 2021, subject to minimum pricing rules of the Toronto Stock Exchange.

At the initial closing, Coinsquare will issue to Mogo a warrant to acquire up to an additional 10 per cent of the outstanding common shares of Coinsquare on a posttransaction 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.

Mogo also has an option to acquire, and certain existing shareholders of Coinsquare have a right to require Mogo to purchase, an additional 10 per cent of the outstanding common shares of Coinsquare within 13 months of the initial investment, subject to certain conditions.

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