Montréal-based Power Corporation of Canada (Power) has marked up its valuation of Toronto FinTech company Wealthsimple for the third consecutive quarter.
Power revealed the latest hike in its Q2 2024 earnings report, noting that as of June 30, the firm considers the fair value of its collective stake in Wealthsimple to be $1.5 billion CAD, up from $1.3 billion following the first quarter and $1.1 billion at the end of 2023.
This represents a 36 percent rise over the first six months of 2024, and a nearly 67 percent jump year-over-year relative to the $0.9 billion that the financial services conglomerate reported its Wealthsimple holdings were worth as of the same time in 2023.
Power’s three consecutive markups have helped Wealthsimple regain some of the value it has lost during the downturn.
“The increase in fair value in the six-month period of 2024 reflects public market peer valuations, as well as Wealthsimple’s business performance and revised revenue expectations,” stated Power’s Q2 earnings report.
These three consecutive markups have helped Wealthsimple regain some of the value it has lost during the downturn, but even today, Power still considers its stake in Wealthsimple less valuable than the $2.1 billion it was worth in May 2021.
In May 2021, Wealthsimple announced a $750-million funding round that included $250 million in primary and $500 million in secondary capital. This financing came at a $5 billion valuation, making Wealthsimple one of Canada’s most valuable private tech companies.
But as market conditions began to deteriorate two years ago and public tech stocks fell, Power and its affiliates started slashing the value of its stake in Wealthsimple, writing it down to $1.7 billion in Q1 and $0.9 billion in Q2 2022, where it remained until the end of last year when Power started marking it up again.
According to Power’s latest quarterly report, through a range of entities it controls, including Power Financial, Portage Ventures, and IGM, Power currently holds an undiluted equity interest in Wealthsimple of 55.1 percent (down from 56.6 percent at the end of 2023). This represents a voting interest of 59.4 percent and a fully diluted equity interest of 43.6 percent.
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While other shareholders may value the company differently, as Wealthsimple’s largest shareholder, Power’s reporting offers a framework to evaluate where Wealthsimple’s valuation may sit today relative to its 2021 $5-billion peak. With Power’s fully diluted equity stake of 43.6 percent valued at $1.5 billion, Wealthsimple may be worth around $3.44 billion CAD overall today.
Through entities it controls, like venture studio and investor Diagram Ventures and investment firm Portage Ventures, Power also holds stakes in other Canadian FinTech startups, including Borrowell, Koho, and Nesto.
Founded back in 2014, Wealthsimple started as an investment platform, but has since grown into other areas of money management, including spending and saving, crypto, taxes, and peer-to-peer payments.
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The company, which saw growth during the pandemic as retail investing became more popular, launched a unified super app in 2022 aimed at bringing all of its FinTech offerings under one roof. In recent years, Wealthsimple has expanded its investment offerings and moved into the digital mortgage space, among other things.
As of June 30, Power reported that Wealthsimple had $43.6 billion in assets under administration (AUA) and 2.5 million Canadian customers, excluding tax clients, but did not disclose any other details concerning the company’s performance or revenue projections.
This AUA total marks a nearly 87 percent increase from the $23.4 billion Wealthsimple held at the same time last year, while this customer count represents a 14 percent year-over-year rise compared to the 2.2 million users the company served as of June 30, 2023, as the company has seen significant growth in recent months.
Feature image courtesy Wealthsimple.