Hike to $2.2 billion reflects rise in public markets, Wealthsimple’s performance, and an upcoming secondary deal.
Montréal-based Power Corporation of Canada (Power) has marked up the valuation of its controlling stake in Toronto FinTech company Wealthsimple once again.
Power now considers its stake in Wealthsimple more valuable than the $2.1 billion it was worth at its prior, 2021 peak.
This represents Power’s fourth consecutive quarterly markup in the value of its Wealthsimple holdings. Power revealed the latest hike in its Q3 2024 earnings report, noting that as of Sept. 30, the Desmarais family’s financial services conglomerate considers the fair value of its stake in Wealthsimple to be $2.2 billion CAD, up from $1.5 billion following Q2 and $1.1 billion at the end of 2023.
This amounts to a 100-percent rise over the first nine months of 2024, and more than double the $0.9 billion that Power reported its Wealthsimple holdings were worth a year ago.
“The increase in fair value in the nine-month period of 2024 reflects an increase in public market peer valuations, Wealthsimple’s business performance and revised revenue expectations, as well as a third-party secondary transaction expected to close in the fourth quarter,” Power’s Q3 earnings report stated.
A Wealthsimple spokesperson confirmed to BetaKit that Wealthsimple is currently engaged in a secondary transaction that is expected to close in Q4, but declined to share further details.
With these markups, which have come amid a bull market for stocks and cryptocurrency, Wealthsimple has regained the value it had lost on paper when Power and its affiliates slashed their valuations of the company and their other FinTech holdings during the downturn amid broader technology and FinTech writedowns.
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Today, Power considers its stake in Wealthsimple more valuable than the $2.1 billion it was worth at its previous peak in May 2021. At that time, Wealthsimple announced a $750-million funding round that included $250 million in primary and $500 million in secondary capital to Power and its affiliates. That financing came at a $5-billion valuation, making Wealthsimple one of Canada’s most valuable private tech companies.
According to Power’s latest quarterly report, through a range of entities it controls, including Power Financial, Portage Ventures, and IGM, the firm 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.
While other shareholders may value the firm differently, as Wealthsimple’s largest shareholder, Power’s reporting offers a framework to evaluate where Wealthsimple’s valuation may sit now relative to its 2021 high of $5 billion. With Power’s fully diluted 43.6 percent equity stake valued at $2.2 billion, Wealthsimple may be worth a total of over $5 billion today, based on Power’s latest assessment.
Founded in 2014, Wealthsimple started as a robo-advisor but has steadily expanded its investment capabilities and moved into other areas of money management since then, including spending and saving, crypto, taxes, and peer-to-peer payments. The 10-year-old company is now profitable with three million users and $50 billion in assets under administration (AUA).
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As of Sept. 30, Power reported that Wealthsimple had $52.1 billion in AUA and 2.6 million Canadian customers, excluding tax clients, but it did not disclose any other details concerning the company’s financial performance or revenue projections.
Wealthsimple co-founders, CPO Brett Huneycutt and CEO Michael Katchen recently joined the BetaKit Podcast to discuss the company’s journey, its recent growth, and how they plan to build “the largest Canadian financial institution.”
To help it get there, Wealthsimple announced plans to triple its headcount in Alberta to 105 by the end of next year as it recruits for engineering, product, client experience, sales, and operations roles in the province.
“We’re excited about Alberta because there is a strong entrepreneurial culture and a young and talented workforce,” the Wealthsimple spokesperson told BetaKit.
Feature image courtesy Wealthsimple.
