Fintech Growth Creates Canada’s Newest Unicorn

For years Wealthsimple has been one of Canada’s leading financial technology companies and operates one of the country’s largest and fastest-growing digital investing services. The company is known financial products such as automated investing, commission-free stock and crypto trading, savings accounts and tax filing software. This fintech is part of the Power Corporation Group of Companies (TSX: POW) which is headquartered right here in Montreal.

Wealthsimple recently announced a $114 million investment led by TCV, a large growth equity investor focused on technology, along with Greylock Partners, Meritech Capital, Allianz X and Two Sigma Ventures. These investors have acquired an ownership interest of 7.5% on a fully diluted basis. And so the purchase price associated with the investment values the equity of Wealthsimple at $1.5 billion, versus a $1.4 billion pre-money valuation. Wealthsimple will use the new capital to expand its market position, build out its product suite, and grow its team in Canada. The investment also marks the first time that Meritech has invested in the Canadian market.

“Our growth over the past six years shows how ready Canadians, and especially younger Canadians, are for a new model of financial services designed around their needs. But too many people still don’t have access to great financial products or are paying too much for them,” said Mike Katchen, co-founder and CEO of Wealthsimple. “There’s still so much room to grow, and to have investors of this caliber join us is an incredible vote of confidence in both our mission and our ability to deliver on it.”

After a previous round of equity financing, the company was estimated to be worth about $740 million US.

“We have been watching Wealthsimple’s rise in the Canadian market and love the way the company is bringing simplicity, humanity, and delight to personal finance,” said David Yuan, General Partner, TCV. “TCV is focused on businesses that have the potential to transform industries, and we are thrilled to work with Mike and the Wealthsimple team to build a leader in financial services and an important consumer platform.”

Prior to the investment, Power Corporation, IGM Financial and Great-West Lifeco (together known as PCC Group) together had a controlling interest in Wealthsimple of 70.1%, on a fully diluted basis, of which Great West’s interest is 26.2%. Since the initial investments in 2015, the PCC Group has invested $315 million. The group’s investment now has a fair value of $934 million. This increase in value of $619 million represents an internal rate of return of 44%. With the closing of the new investment, the Group now has an ownership interest in Wealthsimple of 61.7% on a fully diluted basis, of which PCC’s interest is 23.1%. IGM’s interest has been reduced after this investment to 36%, down from 41% earlier.

“We’re proud of our relationship with Wealthsimple and are excited about their ongoing growth,” said James O’Sullivan, President & CEO, IGM Financial. “Wealthsimple is a leader and pioneer in the investment services space and is a key strategic investment for IGM. Today’s announcement reinforces the strength of Wealthsimple’s value proposition in the marketplace and its potential to generate ongoing value for our shareholders.”

Wealthsimple continues to be controlled by the Power Corporation group of companies, which collectively hold just under 62% of its common shares.

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