eToro to Go Public: $10 Billion SPAC Merger

eToro to Go Public Through SPAC Merger

eToro, a multi-asset investing and trading platform and a competitor to Robinhood, revealed on Tuesday its plans to become a publicly listed company. This will be achieved through a merger with FinTech Acquisition Corp. V, a special purpose acquisition company (SPAC), in a deal valued at $10.4 billion.

Company Transition and Listing

Upon completion of the transaction, anticipated during the third quarter of the year, the resulting entity will operate under the name eToro Group Ltd. It is projected to be listed on the Nasdaq stock exchange.

Rapid Growth and User Acquisition

Founded 14 years ago in Israel, eToro was established with the “vision of opening up capital markets.” The platform’s launch in the U.S. occurred just over two years ago, and it has since experienced substantial growth. In the previous year, eToro reported adding more than 5 million new registered users and achieving gross revenues of $605 million, a 147% increase compared to the prior year.

Notably, the company added over 1.2 million new registered users in January alone, facilitating more than 75 million trades on its platform. This contrasts with 2019, when average monthly registrations were 192,000, and 2020, which saw an increase to 440,000.

Capitalizing on Market Trends

eToro attributes its success to several prevailing market trends, including the increasing popularity of digital wealth platforms, greater retail investor participation, and the growing acceptance of cryptocurrencies. The surge in retail investment, particularly in consumer investment applications, likely benefited the company.

This trend was fueled by the “meme stock” phenomenon, initiated by traders on Reddit who targeted GameStop stock to challenge institutional short sellers.

Platform Features and Regulation

The platform integrates “social” stock trading with cryptocurrency exchange capabilities. In November 2019, eToro acquired Delta, a cryptocurrency portfolio tracking application. The company asserts its position as one of the earliest regulated platforms to offer cryptoassets.

eToro’s platform is currently regulated in multiple jurisdictions, including the U.K., Europe, Australia, the U.S., and Gibraltar.

Investment and Valuation

The transaction is supported by $650 million in committed funding from prominent investors, such as ION Investment Group, SoftBank Vision Fund 2, Third Point LLC, Fidelity Management & Research Company LLC, and Wellington Management.

The merger implies an equity value of $10.4 billion for the combined company and an enterprise value of $9.6 billion for eToro.

Expanding User Base and Future Plans

Currently, eToro boasts over 20 million registered users across 100 countries. Its social community is expanding rapidly, driven by the growth of its total addressable market and supported by trends like the rise of digital wealth platforms and increased retail investment.

The company anticipates receiving approval from FINRA for a broker-dealer license and plans to launch stock trading in the U.S. during the second half of 2021.

FinTech V’s Perspective

Betsy Cohen, chairman of FinTech V, stated that Fintech Masala, the sponsor platform, focuses on identifying companies demonstrating “outsized growth, effective controls and excellent management teams.”

She added, “eToro fulfills all these criteria. Over the past few years, it has established itself as a leading online social trading platform outside the U.S., outlined its U.S. market strategy, and diversified its revenue streams. The company is now poised for significant growth, and we are confident in its ability to capitalize on this opportunity.”

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