Social investment network eToro plans to go public through a merger with a blank check company FinTech Acquisition Corp. V backed by Betsy Cohen, founder and the former CEO of The Bancorp.
Announced today, the combined enterprise, valued at $10.4 billion, will operate as eToro Group Ltd. and is expected to list on the Nasdaq
“eToro is a truly diversified, multi-asset investment platform but we are big believers in crypto and the blockchain technology that underpins it,” said CEO and co-founder of eToro Yoni Assia in an email. “We are excited to see the continued mainstream adoption of crypto.”
Founded in 2007 in Israel, eToro positions itself as a social trading platform where retail investors can trade a variety of assets including stocks, ETFs, and cryptocurrencies. It’s U.S. homepage features a photo of celebrity Alec Baldwin pointing to his phone with the message “Digital Currencies At Your Fingertips.” The platform also offers a choice of investing strategies: direct investment, through a “smart” algorithm-based portfolio of 15 Nasdaq listed stocks picked by well-performing investors, or even by copying the investment strategy of successful investors on the platform. The company was one of the first regulated brokerages in Europe to offer bitcoin in 2013. In 2019, eToro launched crypto and social trading operations in the U.S. Last summer, the firm received approval from FINRA for a broker dealer license, allowing the company to extend its commission-free stocks offering to clients in the US.
The $10.4 billion deal could set a reference point for the IPO of eToro’s rival Robinhood, which was valued at $11.2 billion last year (with February rumors its valuation could be as high as $40 billion) The Menlo Park, California-based brokerage is also seeking a Nasdaq listing later this year. Following the GameStop trading frenzy, the company fell under regulatory scrutiny and is facing dozens of lawsuits over the trading restrictions it temporarily imposed on the platform users amid the rally of shorted stocks including GameStop, AMC and BlackBerry.
Similar to Robinhood, eToro offers commission-free trading. Unlike its troubled competitor and other brokerages, the company doesn’t route its trading data to large investment firms for compensation, a controversial practice known as payment-for-order flow. Instead, eToro is making money through a hybrid model relying on various fees, such as the spread, based on the difference between the bid and the offer price of an asset, as well as inactivity and withdrawal fees.
In 2020, eToro added more than 5 million users and generated gross revenue of $605 million, a year-over-year growth of 147%, according to the statement. Its monthly rate of 27 million trades in 2020 has more than doubled: over 75 million trades were executed this January alone. The platform currently has approximately 20 million registered users from more than 100 countries. In his testimony before the House Committee on Financial Services
“In the last few years, eToro has solidified its position as the leading online social trading platform outside the U.S., outlined its plans for the U.S. market, and diversified its income streams. It is now at an inflection point of growth,” said Betsy Cohen in a statement. Cohen is now one of the SPAC merger champions. Most recently, her blank-check company FTAC Olympus Acquisition Corp announced it’s taking public payments-focused fintech Payoneer in a $3.3 billion deal.
eToro is the latest firm with crypto operations in a race to go public. In January, it was reported New York Stock Exchange-owner ICE would be taking its cryptocurrency venture Bakkt public, also through a SPAC merger. The same month, Coinbase, the largest cryptocurrency exchange in the U.S., confirmed its intention to go public via a direct listing on Nasdaq. As an increasing number of institutional and accredited investors start taking crypto seriously, the dearth of publicly traded companies has limited the kinds of investment opportunities.