XP announces an agreement to purchase Banco Modal, owner of the modalmais platform

In yet another effort in the investment platform battle, XP today announced an agreement to integrate 100% of Banco Modal, a present from modal plus.

XP will use its own shares as currency and issue 19.5 million shares to maintain Modal, which is a 35% premium to the average share price (MODL11) in the last 30 days.

As a result, the platform is roughly rated 3 billion Brazilian riyals, based on current stock prices for the dollar and XP ($27.09), which is listed on the US NASDAQ.

But for investors who bought Modal shares in its IPO, the XP deal brings them a bitter taste. That’s because the investment platform’s shares have accumulated a 55% drop since B3’s debut in April of last year.

After the transaction, Modal shareholders will have a 3.49% stake in XP’s share capital. But before that, Modal intends to convert all preferred shares into common stock and move to Novo Mercado from B3.

XP and Modal together will make up an organization with 3.8 million active customers and revenue of R$11.8 million in the past 12 months through September. The companies hope to complete the union, which also needs to go through regulators, within 15 months.

With interest rates rising and stock markets falling, 2021 has been a tough year for investment platforms and the “financial deepening” thesis – that is, the migration of investors to products with an eye on higher returns and risk taking off the shelves of major banks.

In a more challenging competitive environment, the agreement between XP and Modal could be a sign that faster consolidation of the investment platform market is coming.

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* Content is updated