Mogo Finance Technology Inc (NASDAQ: MOGO) made a major announcement today. The company is merging with Difference Capital Financial Inc. This transaction is incredibly important as it will provide the company with key funding, alleviating any foerseen need to raise capital. Today, we’ll talk about:
- The merger;
- why the news is so important for MOGO and its investors; and
- what we’ll be watching for ahead.
MOGO Announces Merger News
As mentioned above, Mogo Finance Technology made an important announcement this morning. In a press release, the company announced that it will be merging with Difference Capital Financial Inc. There are a few very important aspects of this merger:
- MOGO Retains Name – Following the transaction, the resulting issue will be named Mogo Inc.
- Premium Offered – Following the combination of the company, each shareholder of MOGO will be provided with shares of the new, merged company at a rate of one for one. Considering that a share of MOGO was worth CA$3.08 and Difference Capital was worth CA$4.40 on Friday, shareholders of MOGO are being offered a strong premium through this deal.
- Ownership – Following the close of the transaction, MOGO shareholders will retain ownership of 80% of the combined company while shareholders at Difference Capital will own 20% of the combined company.
- Leadership – Following the close of the transaction, Dave Feller, current Chairman and CEO at MOGO will be Chairman and CEO of the combined company while Greg Feller, current president and Director of the Board at MOGO will be the President and CFO of the combined company.
- Financing – With the merger, Mogo Finance Technology will gain immediate access to between $9 and $10 million in cash, bolstering the company’s balance sheet and leading to a strong stance with regard to financial stability.
- Assets – Through the merger, MOGO will bring on a strong portfolio of investments made by Difference. In fact, the company’s portfolio includes Vision Critical, Hootsuite, and Vena Solutions.
- Approval – While the transaction is subject to shareholder approval, it received the unanimous recommendation of both Mogo’s and Difference’s Special Committees and Boards of Directors.
In a statement, Dave Feller, Founder and CEO at MOGO, had the following to offer:
“This transaction enables Mogo to continue to invest in new products and innovation, building on our leadership position in the Canadian fintech space.
We are excited by the opportunity that the Transaction presents for shareholders of Mogo and Difference and very pleased to have the support of the Difference Board. We look forward to working closely with the leadership team at Difference to complete the transaction.”
The above statement was followed up by Greg Feller, President and Director at MOGO, here’s what he had to offer:
“The merger with Difference strengthens our financial position and represents a significant opportunity to create value for shareholders of the combined entity.
Difference has invested in many of Canada’s leading technology companies and Mogo has built a valuable distribution platform. Shareholders of both companies will benefit from improved financial flexibility as we execute on our strategy of partnering to bring best-in-class products to our more than 800,000 members.”
Why This Transaction Is Important
There are several reasons that the merger between Mogo and Difference is a big deal. However, there most pressing reason has to do with the balance sheet. At the end of the day, Mogo Finance Technology is quickly emerging as a leader in the Canadian fintech market. However, investors have been waiting to get involved, as the balance sheet meant that a fund raise may be coming down the road.
This transaction can be looked at as a creative way to go about financing. With the funding that Difference brings to MOGO, the company has absolutely no need to raise funds in the future. Moreover, Difference is currently one of the largest shareholders in MOGO. As a result, when the merger is complete, the company will be able to retire 2 million shares, greatly reducing the dilution that would have taken place as part of the deal.
Moreover, with the investments that Difference has made over time, the company is bringing in a strong portfolio of leading fintech companies. This will open the door to further financial strength down the road, creating a solid financial foundation from which the company can build.
Don’t Know MOGO Yet? Now Is The Time To Dig In!
For those of you who haven’t been following Mogo Finance Technology, the company is a leading fintech player in Canada with more than 800,000 active users. The company’s claim to fame is a finance app that gives users more control over their spending and makes getting involved in cryptocurrency a simple process.
At the moment, the CNA Finance team is in the process of performing a detailed analysis of the stock. We expect that our full report will be published by Wednesday. Join our mailing list below to be alerted when the full report is available.
Never Miss The News Again
Do you want real-time, actionable news delivered to your inbox? Join the CNA Finance mailing list below!