eToro to go public via SPAC, FinTech Acquisition Corp. V — beats Robinhood to the market – The Average Joe

    eToro to go public via SPAC, FinTech Acquisition Corp. V — beats Robinhood to the market

    Victor Lei — Head of Research

    March 17, 2021

    Source: eToro marketing campaign — starring Kristian Nairn

    March 17, 2021

    Social media has officially infiltrated investing — giving rise to social investing platforms — think investing while “tweeting” your gains (but mostly losses) in a single app.

    eToro, an early champion of this concept, is going public via SPAC, FinTech Acquisition Corp. V ($FTCV) — valuing eToro at over $10b.

    • $FTCV initially jumped 42% on the news and the combined companies will trade under a new ticker after the deal closes in late 2021.

    The new breed of investing platforms

    Founded in 2007, Tel Aviv-based eToro started as a currency trading platform in Europe and over the next 14 years, expanded into stock/cryptocurrency trading and built a social platform for investors.

    While 69% of 2020 sales came from Europe, eToro made a big US push in 2020 — receiving its FINRA license, which allows companies to provide stock-trading services. eToro joins a group of trading apps that exploded in popularity from a record 2020 for retail investing activity:

    • Robinhood is reportedly looking to go public in 2021 despite angering a mob of retail traders and getting the attention of US regulators.
    • Social investing platform, (privately-traded), raised $220m that valued it at $1.2b in Feb. 2021.

    eToro HEDL through the crypto crash of 2018

    In 2019, eToro — which made 39% of sales from crypto in 2018 — saw its sales fall 34% as crypto prices crashed over 80%.

    Does eToro have a crypto problem? It did but not anymore. In 2020, only 16% of sales came from crypto while equities now make up 44%. If crypto activity slows again, eToro would be less impacted. For now, eToro continues to benefit from a surge in retail investing:

    • 147% sales growth in 2020 and a 42% increase in new users
    • 1.2m new users in Jan. 2021 alone, nearly triple its monthly average new users

    For investors… Put those diamond hands back to work, in your day job

    COVID won’t last forever and neither will the surge in retail trading activity. eToro’s preparing investors for its growth to slow — which is forecasted to fall to 68% in 2021 and 17% in 2022.

    To maintain its growth, eToro’s nearly doubling its marketing budget to $422m in 2021. But acquiring customers in the financial sector is expensive and if retail trading slows — eToro’s profitability and growth rates could fall.

    For eToro’s sake, and for ours, let’s hope your boss won’t mind you checking your portfolio every 5 minutes.

    More high-growth investment platforms —UP Fintech Holdings ($TIGR), Futu ($FUTU), XP Inc. ($XP)

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