eToro Going Public Via SPAC: 5 Facts You Need to Know
Before Robinhood can IPO, another millennial-focused trading platform has announced it’s going public.
eToro announced on Tuesday morning that it’s merging with special purpose acquisition company (SPAC) Fintech Acquisition Corp. V (Nasdaq: FTCV). In pre-market trading, FTCV shares immediately jumped 20%, which is a reversal from other SPAC announcements which have recently been met with more muted reactions.
When Can You Buy eToro Stock? What is Fintech Acquisition Corp. V?
The definitive merger agreement is expected to close in the third quarter of 2021, at which point eToro will likely change its ticker symbols to something resembling the company.
Until that date arrives, you can effectively own eToro by purchasing Fintech Acquisition Corp V. The SPAC will contribute $250 million to eToro while the company also receives $650 million in a private investment in public equity (PIPE) from Softbank, Third Point, and Fidelity.
The merger values eToro at $10.4 billion after cash proceeds.
eToro and FTCV: 5 Facts You Need to Know
With FTCV up 20% in pre-market trading investors are clearly excited about the prospect of eToro and its valuation in this deal, so let’s dig into what makes this SPAC stand out.
- Revenue of $605 million in 2020: That’s 147% growth from the prior year.
- 75 million: Monthly trades in January 2021, a nearly ten-fold improvement from eToro’s average monthly trade volume of 7 million in 2019.
- 34 years: The median age of eToro users. Investors have been excited about Rohinhood and its appeal to millennials. eToro has similar demographics and bills itself as particularly appealing to younger investors thanks to its ‘social trading’ features.
- 16%: Percent of customer assets in cryptocurrency. While eToro started with a focus on cryptoassets (63% of assets were in crypto in 2017), it has successfully diversified. Today most customer assets (44%) are in equities.
- $2.5 billion: The company’s projected revenue in 2025.
The Bear Case: Why Avoid FTCV Today
There are some very impressive numbers in eToro’s announcement, however, there are some warning signs.
- Revenue tanked in 2019: eToro’s revenue dropped 34% between 2018 and 2018. The reason? The company was heavily reliant on cryptoasset-related revenues. As that market deflated, eToro’s revenues sank.
- This could happen again: While the company paints the 2019 revenue plunge as a one-time event, trading in equities today could also be at a peak that could see declines. If stocks were to decline over an extended period, this could return equity trading — and also eToro’s revenue — to far lower levels.
It’s smart for startups like eToro and Robinhood to go public at a time of heightened investor interest, but when every company in a category is going public, it’s wise to ask yourself if recent growth rates are truly sustainable.
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