Mogo Finance Technology Inc. faced pressure in its public debut in Canada, dropping more than 5 per cent on the first day of trading on the Toronto Stock Exchange.
The Vancouver-based online lender is a rare disappointment in a heady Canadian initial public offering market in 2015. Other recent IPOs such as Cara Operations Ltd., Shopify Inc. and Stingray Digital Group Inc. had sizable first day pops.
Mogo raised $50-million in an offering that had to be repriced downwards. The company had initially hoped to price the stock between $11 and $13 a share but ended up pricing at $10 instead.
"There were certain key institutions that were price sensitive," said David Feller, Mogo's co-founder and CEO, in an interview.
"Getting the right institutional shareholder base was really important to us and that's why we were more than happy to price it where we did."
Mr. Feller started Mogo (which he says is short for "money on the go") in 2003 and owns 10.8 per cent of the common shares. The site uses an algorithm to figure out the risk profile of a borrower in about 3 minutes and advances roughly 50 per cent of its loans to customers the same day they apply.
Mogo competes against the big banks, credit card companies and a number of other online lenders. The lender had revenue of $23-million in 2014 and has been growing its sales year-over-year, but it is currently losing money. It posted a net loss of $4.2-million for the first three months of 2015.
Mr. Feller says generating a net profit on a quarterly basis is not the priority right now – investing and growing the business is the biggest objective.
Mogo counts Peter Brown, founder of Canaccord Financial Inc. (now Canaccord Genuity Group Inc.) as an investor. Mr. Brown, who is also chairman of the board, bought into the company in early financing rounds and added to his position in the IPO. Most of the company's existing investors and underwriters are subject to a 180-day lockup agreement, during which they have agreed not to sell their shares.
Difference Capital Financial Inc., a publicly traded merchant bank co-founded by Michael Wekerle, invested $2-million in Mogo last year. Mogo is the first company in its portfolio to go public.
BMO Nesbitt Burns Inc. and Cormark Securities Inc. were lead bookrunners on the deal. Canaccord Genuity Inc., CIBC World Markets Inc. and National Bank Financial Inc. acted as co-managers. Mogo paid a commission of 6 per cent to bankers, which is the norm for a deal of this size.