Digital payments provider Mogo Inc. is set to become the second Canadian company to offer no-commission stock trading as it strikes a deal to purchase online investing company Moka Financial Technologies Inc.
The Vancouver-based fintech company announced on Tuesday it has agreed to buy Moka, an online saving and investing mobile application, in an all-stock transaction valued at $64-million that will boost the company’s client base over 40 per cent to more than 1.7 million individuals.
The deal is expected to close in the second quarter of 2021 and, upon regulatory approval, will mean Mogo exchanges five million shares and assumes $3-million in net debt to acquire 100 per cent of Moka.
Mogo’s president and chief financial officer Greg Feller told The Globe and Mail the deal will also accelerate Mogo’s plans to launch a free stock-trading platform for Canadians “before the year-end.”
The acquisition is the company’s first foray into the traditional wealth management space and follows several months of retail investors flocking to online brokerages to pursue do-it-yourself stock trading.
Based in Montreal, Moka manages about $250-million in assets. The mobile application was first launched in 2017 and offers investors access to a roundup feature, which automatically rounds up daily purchases and invests the spare change in personalized, diversified portfolios of low-cost exchange-traded funds.
To date, Moka has raised $14-million in funding, most notably from NAventures, the venture capital division of National Bank of Canada, and Desjardins Capital, the venture capital arm of North America’s largest association of credit unions.
Eight Capital research analyst Suthan Sukumar said in a note the deal has “materially accelerated” Mogo’s wealth management strategy, with the addition of Moka’s 500,000 users and an “experienced” investments team, which will “ultimately fast track Mogo’s planned free stock trading offering, further aligning the company’s model with that of global consumer fintech peers like [Square Inc.] and Robinhood.”
Moka first caught the eye of Greg Feller and Mogo chief executive officer and founder David Feller after several of their employees began using the application themselves.
“When you look at the overall players in the digital wallet space – the ones who will succeed are the companies who can make the biggest impact with helping people with their finances,” David Feller said in an interview.
“Customers are not going to want to have 10 applications on their phone for all their financial needs – they want it all in one place.”
David Feller says fintech providers – including Moka – have been able to “gamify” the experience around saving and investing so clients can more “easily understand their finances” – similar to what Robinhood has accomplished in the United States around an “easier to understand” stock-trading experience.
Mogo first entered the Canadian fintech space as an online lender in 2005, offering clients a lower-cost alternative to payday loans. Like many fintech players, the company has expanded into other areas and now offers Canadian clients – in addition to online personal loans – identity fraud protection, mortgages, a prepaid Visa card, credit score viewing through Equifax and access to cryptocurrencies.
Once the acquisition is complete, Moka’s founder and CEO Philip Barrar will join Mogo’s leadership team in a newly created role of chief innovation officer. Liam Cheung, chairman of Moka and partner at Moka shareholder Tactico, is expected to join Mogo’s board of directors.
Mr. Cheung has decades of experience in the Canadian wealth management space. Prior to his time with Tactico, Mr. Cheung helped launched Fidelity Clearing Canada, which provides custody and back-office support services to Canadian investment firms, and he was closely involved with independent online brokerage Jitneytrade, where he served as chairman.
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Clare O’Hara