Mogo Inc (NASDAQ: MOGO) is headed for the top in the market this morning, and for good reason. The company announced that it plans to add Bitcoin to its balance sheet. Here’s what’s happening:
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- Mogo to Add Bitcoin to Its Balance Sheet
- Management Commentary
- Why This News Is Exciting Investors
- Final Thoughts
Mogo to Add Bitcoin to Its Balance Sheet
In the press release, Mogo said that it plans to make an initial corporate investment of up to $1.5 million in Bitcoin. Moreover, the company will consider additional investments in 2021, possibly adding another $17 million of Bitcoin to its balance sheet.
Importantly, the initial purchase represents about 1.5% of the company’s total assets as of the end of the third quarter of 2020. However, if the company invests the $17 million in additional purchases of Bitcoin, about 18% of its assets will be invested in the wildly popular cryptocurrency..
In a statement, Greg Feller, President and CFO at MOGO, had the following to offer:
We are strong believers in bitcoin as an asset class and believe this investment is consistent with our goal to make bitcoin investing available to all Canadians. In addition, we believe bitcoin represents an attractive investment for our shareholders with significant long-term potential as its adoption continues to grow globally.
We plan to initially allocate a modest portion of our capital toward bitcoin investments and will consider additional investments in bitcoin as we monetize some of our existing $17 million portfolio which we expect to begin doing in 2021.
As the only well-established Canadian company publicly traded on the TSX and NASDAQ, offering a simple and low-cost way to buy and sell bitcoin through our award-winning app, we are well positioned to capitalize on the fast-growing demand for bitcoin.
Why This News Is Exciting Investors
There are several reasons investors are excited about the news. First and foremost, MOGO has been working its way into the cryptocurrency space for several years, launching MogoCryptoc in 2018. Since then, MogoCrypto has become the easiest way to buy and sell Bitcoin in Canada.
Through MogoCrypto, members can buy and sell bitcoin at real-time prices instantly through the Mogo App. Moreover, this plays to the utility issue we’ve seen with Bitcoin. Through the Mogo App, Bitcoin proponents can instantly turn their holdings into cash that can then be spent using the MogoSpend Platinum Prepaid Visa card, making it possible to spend Bitcoin at any retailer that accepts Visa.
Moreover, MOGO recently announced its Bitcoin rewards program, the first and only program like it in Canada. The Mogo Bitcoin rewards program provides members with the ability to earn Bitcoin through engagement with the company’s products and accumulate the cryptocurrency over time.
Considering the fact that Bitcoin grew in value by more than 200% in 2020, the company’s activities in the space are overwhelmingly exciting. The increase in value was due to increased adoption, which is translating to increased use of Mogo services. In fact, Mogo reported a 135% month-over-month increase in the dollar value of Bitcoin traded on its platform from October to November of 2020.
All in all, the news released by MOGO is huge. Mogo is the Square Cash App of Canada and seems to be following along the same lines. Recently, Square also made the decision to add Bitcoin to its balance sheet, but in a much smaller percent of assets than Mogo.
The move is a smart one too.
At the end of the day, Bitcoin adoption is likely to continue climbing, and as it does, the price will only rise. So, MOGO is in a strong position to improve its balance sheet through the investment.
At the same time, the company is overwhelmingly undervalued. While Square trades at 30 times revenue, and various Bitcoin miners trade at over 50 times revenue, MOGO stock trades at just 4 times revenue, making it a top pick in the space.
CNA Finance is not an investment advisor or broker dealer. The opinions expressed in this article are those of the authors and have not been reviewed by Mogo or any entity affiliated with the company. CNA Finance has a monetary relationship with Mogo.