Last month, trading platform eToro announced plans to go public by merging with a special purpose acquisition company. Since the announcement, shares of the SPAC, Fintech Acquisition Corp V, have spent more time slipping than rising.
Details on eToro’s SPAC merger
The SPAC deal values the combined company at approximately $10.4 billion, the companies said in a statement, and it implies a valuation of approximately $9.6 billion for eToro alone. The companies are raising approximately $650 million in equity to support the transaction.
Among the investors included in the equity transaction are Third Point, Softbank Vision Fund II, Fidelity Management & Research, Willington Management and ION Investment Group. The deal includes $250 million in gross proceeds from the SPAC’s cash in trust from a fully committed private investment in public equity (PIPE) at $10 per share, which will close at the time of the merger.
After the merger, the firm will be known as eToro Group Ltd. and be listed on the NASDAQ. eToro expects to have approximately $800 million in net cash on its balance sheet following the completion of the merger.
Future plans
The trading platform joined the U.S. Financial Industry Regulatory, or FINRA, last year, and it plans to start offering stock-trading services in the U.S. in the second half of this year. eToro was founded in 2007 in Israel and currently has 20 million registered users in dozens of countries.
The company expanded into the U.S. in 2018 by offering cryptocurrency trading services. Its revenue more than doubled last year to $605 million, and it added more than 5 million new registered users in 2020. Additionally, eToro said monthly registrations rose to 1.2 million in January, up from an average of 440,000 in 2020. It executed over 75 million trades in 2020, almost three times its monthly average of 27 million.
One thing eToro is particularly known for is social trading, as it often describes itself as a social trading platform. CEO Yoni Assia said in a statement that they founded eToro with the vision of opening the global market for everyone to trade and invest in a simple and transparent way.” He added that the trading platform’s users come to communicate with each other in addition to trading and to “automatically copy successful investors from all around the world.”
SPAC merger led by Betsy Cohen
Serial deal maker Betsy Cohen is leading the SPAC merger with eToro. She has also taken wire-transfer service International Money Express, investment bank Perella Weinberg Partners and fintech firm Paya Holdings public through previous SPAC deals.
In a statement, Cohen noted that over 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.” She added that the company is “now at an inflection point of growth,” and she believes it is “exceptionally positioned to capitalize on this opportunity.”
Cohen told Yahoo Finance last month that eToro’s social network platform “allows new investors and less sophisticated investors to learn and copy more sophisticated investors.” She believes the company’s platform is differentiated and that it is “very, very helpful to the investing patterns of young people.”
Why Cohen is betting on eToro
Assia told Yahoo Finance that eToro is the only global broker-dealer offering commission-free stock trading in more than 100 countries. He added that the markets are at record highs, and they’re seeing a sizable increase in interest from a new generation looking to invest in U.S. stocks.
The CEO explained that for most users who sign up for eToro, it’s their first brokerage account and their first time trading. Assia added that as eToro and other digital trading platforms scale, they have a responsibility to ensure that their customers are “educated about risk management.”
Cohen also told Yahoo Finance that eToro helps investors “not only to have fun but understand what they’re doing.” She noted that investing is a serious occupation rather than a game and that eToro “underscores and allows people to invest by communicating with one another and learning from one another in a very, very differentiated way.”
eToro is likely to beat competitor Robinhood to the public markets, as it hasn’t announced any firm plans to go public yet, although it is widely expected to do so. The deal also comes as U.S. regulators are starting to take a hard look at SPACs.
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