Tuesday, March 23, 2021, Mogo; a major player in the FinTech industry announced that they have entered into a binding letter of intent to acquire 100% of Moka Financial Technologies Inc. The acquisition of Moka; an innovative saving and investing app, will allow Mogo to enter the $4+Trillion dollar Canadian wealth management industry. This $64 million deal is expected to come to a definitive agreement and close in Q2 2021.
Who is Mogo?
Mogo is a financial technology company established in 2015. It offers innovative ways to manage, borrow, and invest money. Their goal is to help Canadians gain control over their finances so that they can make better financial decisions. In fact, Mogo is already trusted by over a million members. Mogo Members are able to gain access to the Mogo digital spending account where they can track their Mogo Visa* Platinum Prepaid Card and invest in bitcoin. Members can also monitor their credit score for free, and opt for services like identity theft protection and personal loans.
Who is Moka?
Moka is a Montreal-based company that has been growing exponentially since 2017. Since its inception, it has expanded to France and its app has been downloaded by over 1 million users. Moka is a fintech company with a social mission to help empower Canadians by making it easier to gain financial control. The Moka app works by rounding up your daily transactions and then using that spare change to invest. While you can’t invest in individual stocks, Moka simplifies the process by automating everything and invests your spare change in low-cost ETFs. Users can invest through a TSFA, RRSP, or a non-registered account. With no minimum investment requirements and a fully automated system, Canadians with little financial knowledge can start saving and investing easily using Moka.
More on The Agreement
Mogo will be acquiring Moka in a 64 million all-stock deal. As part of the deal, Mogo will be purchasing all of Moka’s issued and outstanding shares, while Moka will take hold of 5 million Mogo common shares. Moreover, Mogo will assume net debt of 3 million as part of the agreement. More details will be hashed out as the closing transaction date draws near.
Why is Mogo Acquiring Moka?
The acquisition of Moka is a strategic horizontal integration of two businesses. Typically, when this happens, the motive behind it includes economies of scale, increased market share, and greater product or company differentiation. In Mogo’s case, we can see a clear increase in market share and product differentiation.
Increased Market Share
There are many players in the fintech industry, from major giants to company start-ups and gaining market share can be difficult. But with Mogo’s acquisition of Moka, Mogo’s member base is expected to increase by over 40%. According to the press release, this increase will “accelerate the growth of [their] subscription & transaction-based revenue”. Which in turn, will let Mogo gain market share in the $4+ trillion wealth management industry. Moreover, the acquisition provides them with the ability to expand their services to Quebec, furthering their goals of gaining market share.
Increased Differentiation
Company or product differentiation is a major competitive advantage for most businesses. With the acquisition of Moka, Mogo will be able to offer its members more products, tools, and features that can help reach their financial goals.
By leveraging Moka’s investing platform, Mogo will gain access to “over $250 million of AUM along with registered portfolio management capabilities throughout Canada & Europe” which will help Mogo form the core of MogoWealth.
Moreover, Moka’s innovative saving and investing app particularly compliments Mogo’s existing service Mogo Crypto; which is an account that allows users to invest in bitcoin. Thanks to Moka’s technology, Mogo will be able to accelerate its plan to “launch a free stock trading solution for Canadians”.
New Shareholders
Along with Moka, the purchase of Moka will bring in new shareholders for Mogo, including:
- Desjardins Capital
- National Bank of Canada
- Ferst Capital Partners
To top it off Philip Barrar; founder & CEO of Moka and Dr. Liam Cheung; Moka’s chairman and partners will be joining Mogo’s team. Mr.Barrar is expected to join as the Chief Innovation Officer while Dr.Cheung will join Mogo’s board of directors.
