Here's Everything You Need To Know About The eToro SPAC Merger
Cryptocurrency and investment management platform eToro plans to go public via a merger with a special purpose acquisition company (SPAC). The SPAC the Robinhood rival plans to merge with is led by serial dealmaker Betsy Cohen. It's not a traditional initial public offering, but it takes the company public just like an IPO.
The eToro SPAC merger: The Basics
The deal with FinTech Acquisition Corp. V (NYSE: FTCV) slaps a valuation of approximately $10.4 billion on the combined company, according to a statement issued in response to a report from Bloomberg last month. eToro and FinTech are raising approximately $650 million in equity to support the transaction.
Investors participating in the equity transactions include Third Point LLC, Softbank Vision Fund, Fidelity Management & Research, ION Investment Group and Wellington Management. The statement also indicated that eToro joined the Financial Industry Regulatory Authority Inc. (FINRA) last year and plans to start offering stock trading in the U.S. in the second half of this year.
eToro was founded in 2007 in Israel and now has 20 million registered uses in more than 100 countries. The company expanded into the U.S. in 2018. Like Robinhood and its other rivals, eToro offers zero-commission trading. However, unlike U.S. companies, it doesn't make money by transferring customer orders to trading firms that fulfill them, a practice called payment-for-order flow. Instead, the firm makes its money by taking the difference between the price it pays for securities and the price it passes to customers.
eToro also touts itself as a social trading network where investors can share their trades and copy those made by the system's best performers. Cohen describes eToro as "a social investment and social trading company where people actually learn, not a game where you trade as much as you can and then go – bingo."
Why eToro Is Going Public Now
In an interview with Cointelegraph, eToro CEO Yoni Assia said a number of factors suggest this is the right time for the company to go public. He explained that the firm increased its size significantly last year, growing its revenue 147% year over year.
The new year arrived with the mainstream and cryptocurrency markets in full swing, alongside "the biggest discussion we've seen in human history around the intersection of social media and investment platforms." Assia described the situation as "a perfect storm."
He also said they see "immense interest all around the world from people who want to participate in the global markets." According to Assia, their original vision when they started the company was to open the global markets for "everyone to trade and invest in a simple and transparent way."
What Will Happen Next?
After the merger with FinTech Acquisition Corp. V, the combined company will have a new ticker. The SPAC currently trades on the Nasdaq under the ticker symbol "FTCV," and although the company hasn't selected a new ticker, Assia said they wouldn't keep the old one.
Cointelegraph asked him what would change at eToro after it goes public, and he said most of their day-to-day work would stay the same. Assia said after they bring in the $650-million PIPE, or private investment in public equity, and the $250-million SPAC, they will have a strong balance sheet. At that point, they could consider making acquisitions or expanding more aggressively into other geographical areas, whether that includes in the U.S. or other markets.
eToro is just the latest of a number of crypto- and trading-focused companies planning to go public recently. Robinhood is planning its IPO soon, while Coinbase could go public as early as this month.
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