Arauca Capital B.V. / Arauca Capital Fund on VersaBank

Arauca initiated VersaBank because its Structured Receivable Program provides exposure to point-of-sale lending while leaving underlying credit losses with financing partners and protecting the bank through cash holdbacks. The Canadian business has compounded rapidly with effectively no credit losses, while the much larger US market provides a new growth runway following the acquisition of an American bank charter. Arauca expects the US operation to benefit from lower funding costs and wider spreads while much of the expense associated with establishing the platform has already been incurred. Reported earnings are therefore viewed as understating the underlying economics as one-off costs disappear and the US asset book scales. Tokenised deposits and blockchain custody provide additional optionality that Arauca assigns no value to in its base case, while the entry valuation of roughly 1.3 times book value and less than 9 times the manager's estimate of next year's earnings provides the margin of safety.