WonderFi To Acquire Coinsquare, CoinSmart To Create Largest Crypto Platform In Canada

Consolidation is coming to the Canadian crypto industry. It was jointly announced this morning that WonderFi Tech (TSX: WNDR), Coinsquare, and CoinSmart Financial (NEO: SMRT) will be combining to create one of the largest crypto asset trading platforms globally.

The operation on a combined basis is set to offer retail and institutional trading, staking products, and crypto payment processing. The firm also evidently intends to enter the world of gaming and sports betting in the near term.

The driving force behind the merger appears to be the creation of the largest crypto platform in Canada, which will have over $600 million in assets under custody and total transactions since 2017 of approximately $17 billion. Total users are estimated to be 1.65 million. Despite taking this title however, 2022 revenues on a combined basis amounted to just $37 million, and while the trio touts “cost synergies” associated with the transaction, they refused to place a dollar figure behind the synergies claim.

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The balance sheet however is expected to have cash and investments in excess of $50 million on closing, while the firm will have no debt and exposure to multiple wholly owned crypto platforms. The entity meanwhile will also be an investment dealer, operating under Coinsquare Capital Markets.

“This combination will create a safe, secure, scalable and regulated trading platform that can compete with the unregulated global exchanges still operating in Canada. Canadian investors want to know that their platform has longevity, their funds are safe and secure, and they can access innovative crypto products. The combination of these 3 leading Canadian brands provides a path to building a profitable, first-of-its-kind multi-asset class platform in Canada,” commented Martin Piszel, CEO of CoinSquare.

The transaction will see WonderFi issue 269.7 million shares to acquire Coinsquare, and a further 119.2 million shares to acquire CoinSmart. After the closing of the transaction, WonderFi shareholders will own 38% of the combined company, while Coinsquare and CoinSmart shareholders will own 43% and 19%, respectively. CoinSmart shareholders will also be entitled to up to $15 million in earn-out consideration.

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The proposed board meanwhile will consist of four members from Coinsquare, three from WonderFi, and two from CoinSmart.

Shareholder meetings are currently scheduled for the second quarter of 2023, with closing slated to occur thereafter.

“For years operating a registered cryptocurrency platform was a disadvantage as competitors that provided services without the burden of compliance costs were far more profitable. Those days are over. Investors that see the tremendous potential of cryptocurrencies to make financial services more transparent, less costly, and more productive are seeking investment opportunities that operate in harmony with their regulators,” commented Kevin O’Leary, a strategic investor in WonderFi.

WonderFi Tech last traded at $0.16 on the TSX.

Information for this briefing was found via Sedar and the companies mentioned. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.

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