WonderFi Technologies Inc, Coinsquare and CoinSmart Financial Inc announced that they have entered into a business combination agreement to merge their businesses.
The companies said the combined company will offer one of the largest regulated crypto asset trading platforms in the world and will provide Canadians with a wide range of diversified products and services, including both retail and institutional crypto trading, staking products, B2B crypto payment processing and will also soon include sports betting and gaming.
Additionally, they noted that the combined company will have transacted over $17 billion since 2017 and have over $600 million in assets under custody, with a registered user base in excess of 1.65 million Canadians.
"What we will deliver with the combination of both Coinsquare and CoinSmart is a unique platform where users will trade, earn and pay with crypto, invest in equities, and soon, place wagers all in one compliant ecosystem," WonderFi president and interim CEO Dean Skurka said in a statement. "With this combination, we have the scale to be the market leader in Canada, a strong balance sheet that will allow for expansion, and a clear path to profitability.”
The companies said the combined company's revenue growth strategy for 2023 and beyond is expected to involve expanding its product offerings to diversify its revenue potential including:
- Retail and institutional crypto trading;
- Global crypto payment processing;
- iGaming and sports betting;
- Staking and yield products; and
- Fractional stock trading.
The planned diversification of product offerings, within one Canadian-owned and operated ecosystem, is intended to appeal to a wider range of customers and provide them with an all-in-one solution, they added.
Transaction details
Under the terms of the transaction, WonderFi will issue approximately 269,727,080 common shares to Coinsquare's shareholders, and approximately 119,181,733 common shares to CoinSmart's shareholders. On completion of the deal, WonderFi shareholders will own approximately 38% of the combined company, Coinsquare shareholders will own approximately 43% and CoinSmart shareholders will own approximately 19%, on a partially diluted basis.
CoinSmart shareholders will be entitled to share in an earn-out of up to an additional $15 million of total consideration, based on the revenues of CoinSmart's SmartPay business, over three years following the closing of the transaction.
The transaction will be effected by way of two court-approved plans of arrangement involving Coinsquare under the Canada Business Corporations Act and CoinSmart under the Business Corporations Act (British Columbia).
The arrangements will each require the approval of at least two-thirds of the votes cast by the shareholders of each of Coinsquare and CoinSmart voting at special meetings of those companies, expected to be held in the second quarter of 2023. A majority of the WonderFi shareholders will also be asked to approve the transaction, under the rules of the Toronto Stock Exchange, at a special meeting of WonderFi.
Completion is also subject to regulatory and court approvals and other customary closing conditions, including receipt of approval under the Competition Act (Canada), New SRO, the Canadian Securities Administrators, the Neo Exchange Inc. and the Toronto Stock Exchange.
Contact the author at stephen.gunnion@proactiveinvestors.com