eToro gave its early personnel and angel investors an opportunity to offload some of their shares to certain institutional investors, as per an employee memo procured by CNBC. The sale of shares added up to $120 million, and the company was granted a lower valuation of $3.5 billion than what they had earned during their main funding round at the beginning of the year, according to CNBC sources familiar with the situation. This move follows eToro's abortive effort to go public with a merger involving a blank-check firm, Fintech V, last year.
eToro, a stock trading platform, recently concluded a secondary share sale worth $120 million, causing the firm's valuation to drop below the $3.5 billion it was valued at in a prior funding round. This gave early staff members and angel investors an opportunity to sell shares to existing eToro investors. The round itself is not a new issuance of stock and won't generate any funds for the company, but rather shows what investors are willing to pay to be stakeholders. This follows eToro's termination of plans to go public through an alliance with Fintech V, which would have valued the firm at $10 billion. This decision was made in the face of decreasing equity and crypto values, as well as a decline in trading activity among retail brokers.Yoni Assia, eToro's CEO and co-founder, stated in a Monday memo to employees that the company is viewed as a desirable investment opportunity due to its steady and profitable growth. Such a stance has enabled existing shareholders, as well as employees with vested options, to avail the chance to sell a certain portion of their shares to these purchasers. He also noted that this isn't an act of primary raising capital—it is instead a way for some of the company's long-time stakeholders and workers to gain some liquidity. According to Assia, those staff members with eligible options will receive a personal e-mail containing further details.Previously, eToro had attempted to become publicly listed through a special purpose acquisition company, with a proposed valuation of $10 billion. The fundraising was eventually unsuccessful, yet the business raised $250 million from SoftBank Vision Fund 2, ION Investment Group, and Velvet Sea Ventures in the form of an advance investment agreement. This method involves investors paying beforehand for shares, which are later on allocated to them with the potential of a discount. Additionally, a partnership was secured between eToro and the well-known social media platform Twitter(now referred to as X), granting its users the ability to experiment with stock and crypto trading with the help of cashtags (searchable by typing a dollar sign before the ticker symbol).
eToro recently revealed plans to deepen its partnership with Twitter, following a meeting between its CEO Yoni Assia and X CEO Linda Yaccarino in New York. The online wealth management platform observed a rise in demand during the Covid-19 pandemic, when people had more time and, for some, more money to invest. This prompted a surge in the prices of shares such as GameStop, leading to significant pressures on short-selling funds. However, in recent times, such platforms have faced increasing difficulties due to the rise in living costs. Freetrade, a UK-based brokerage startup, saw its valuation cut by 65% during a crowdfunding round, as a result of a "different market environment".
In a memo to staff, Assia commented upon eToro's successful performance in the first half of the year, with EBITDA of over $50 million, nearly 3 million funded accounts and assets under administration of $7.8 billion. He further noted the company's progress in terms of product development, launches and partnerships, as well as mentioning that a number of existing investors had shown an interest in buying more of the firm's shares. Assia concluded the memo by wishing staff a refreshing break in August.
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