Three of Canada’s leading crypto-trading platforms are putting their drama aside to form one big regulated company. After months of rumours and a lawsuit threat, Vancouver-based WonderFi announced its intent to acquire rivals Coinsquare and CoinSmart. The combined company had an implied valuation of $100 million when the deal was announced Monday morning, WonderFi strategic investor Bobby Halpern told The Logic. Here’s what you need to know:
The background: Coinsquare announced plans to acquire CoinSmart for $29 million in cash and stock plus performance incentives in September 2022, but backed out in January. Days later, BNN Bloomberg reported Coinsquare and WonderFi were in merger talks of their own. When CoinSmart threatened to sue Coinsquare, WonderFi spotted an opportunity “to bring them both together and focus on a larger opportunity,” said interim chief executive Dean Skurka in an interview with The Logic on Monday.
The deal: In an all-stock transaction, WonderFi will issue shares to Coinsquare and CoinSmart’s shareholders. When the deal closes, Coinsquare shareholders will own about 43 per cent of the combined company, WonderFi shareholders will own about 38 per cent and CoinSmart shareholders will own about 19 per cent. The board will be comprised of four nominees from Coinsquare (including one from fintech Mogo, Coinsquare’s largest shareholder, which will own about 14 per cent of the combined company), three from WonderFi and two from CoinSmart. Halpern, who helped put the deal together, told The Logic all senior members of the companies’ teams will remain with the new business and a steering committee will later determine who will serve as CEO.
The combined company will be the largest regulated crypto-trading platform in Canada with 1.65 million registered users. Coinsquare is registered with the Self-Regulatory Organization of Canada, formerly known as the Investment Industry Regulatory Organization of Canada, and the combined company will be as well. The company plans to eventually offer fractionalized stock trading and sports betting and has international expansion ambitions.
Canadians might recognize a few names in the deal: Kevin O’Leary, of “Shark Tank” and “Dragons’ Den” fame, is a strategic investor in WonderFi. Fellow erstwhile Dragon Michael Wekerle is a Coinsquare board member and will be on the board of the combined company. And, Noel Biderman, who was the chief executive of Toronto-based affair facilitation site Ashley Madison at the time of its infamous hack, will head the steering committee that will name a new CEO and iron out the details of combining the three firms.
What’s next: The deal requires approval from shareholders, regulators and courts. All of WonderFi’s takeovers are subject to review by the Competition Bureau. The market for crypto platforms remains challenging and it can be difficult to close acquisitions. “We’ve got our hands full [in terms of] getting this thing closed, that’s for sure, but no concerns,” Skurka said.