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eToro Closes $120M Share Sale at Reduced Valuation Versus Robinhood Competitor

Lanon Wee

eToro presented its early staff and angel investors with the opportunity to offload their shares to various institutional investors, as per a memo obtained by CNBC. This share sale amounted to $120 million, and the company was given an evaluation that was slightly smaller than the $3.5 billion raised in the aforementioned primary funding round in the current year. This comes after eToro put a halt to its plan for a public offering via a merger with blank-check firm, Fintech V, in 2020. eToro, a stock trading platform, has accepted a $120 million transaction of secondary shares, leading to a valuation lower than the $3.5 billion it was valued at during a primary round of funding this year. Through this agreement, the Israeli digital brokerage granting those who joined early and angel investors the chance to sell stock shares to several of eToro's current investors, based on an internal correspondence obtained by CNBC. This method of share sale does not result in the company receiving any fresh funds, but rather is a sign of the worth investors are prepared to pay to own part of the firm. The arrangement comes after the scrapping of eToro's plans of a Public Listing via a partnership with Fintech V, which would have given the company a $10 billion value. The decrease in crypto and equity prices negatively influenced the deal, as investors adjusted their commitment to tech and brokerages experienced a decrease in trading operations. Yoni Assia, eToro's CEO and co-founder, stated in a memo to employees that they are considered a "great investment opportunity" due to their sustainable growth, and this secondary transaction will provide existing investors and staff the chance to sell a portion of their shares. Assia then advised staff to maintain confidentiality, and those with eligible options will receive an email with further instructions. SoftBank Vision Fund 2, ION Investment Group, Velvet Sea Ventures, and others recently poured in $250 million, valuing eToro at $3.5 billion (in contrast to the intended $10 billion when seeking a SPAC floatation). This came in the form of an advance investment agreement, to be exchanged for equity when a SPAC deal does not take place. Furthermore, a partnership was formed between eToro and Twitter's X in the beginning of 2021, allowing Twitter users to trade stocks and cryptocurrencies by searching for "cashtags" (for which the ticker symbol is preceded by a dollar sign). eToro has signified that it is aiming to expand its alliance with Twitter, or X, in various forms. The CEO of the company had a meeting with X CEO Linda Yaccarino in New York to explore the potential of amplifying their partnership.Online wealth management platforms, such as eToro, have gained the advantage of an upsurge in demand during the pandemic as people were stuck at home and had extra time, as well as funds, for investing in stocks and other resources.Due to the raised retail investor demand, a number of so-called "meme" stocks, including GameStop, underwent a surge in prices and put force on short-selling funds.Currently, online brokerage systems have been encountering a struggle due to the escalating cost of living, which has made it difficult for customers to spend their remaining wealth from the days of Covid. The U.K. brokerage startup, Freetrade, cut its evaluation by 65% in a crowdfunding round as a result of a "transformed market environment". Yoni Assia, CEO of eToro, recently distributed a memo to his staff, which outlined the following: Greetings eTorians, As August approaches, I would like to recognize the successes in the first half of the year and reveal the plans for the second half. As reported in July's AHM, eToro earned EBITDA (profits) of over $50 million, with funded accounts now totalling nearly 3 million and assets under administration (AuA) being $7.8 billion. Our success in the first half of the year was supported by the rally in equity markets (in June, the highest volume of equities trading since 2021 was recorded) and the recovery of the crypto markets. We have also taken steps to develop our costs for lasting, lucrative growth. So far in 2021, we have introduced many products, launched projects and partnerships, which included the significant upgrade to our charts via a partnership with TradingView (more coming soon), a ISA with MoneyFarm, essential progress in UX optimization such as the new AI assistant, the launching of the remarkable eToro Academy, the extended hours trading option, the addition of women to our football sponsorships, adding more assets and more. I also wish to inform you that we have been reached out to by several existing investors who show interest in buying more shares in eToro. Due to sustained, profitable growth, eToro is viewed as an attractive investment by many investors. Notwithstanding, this is a secondary transaction which will give current shareholders of eToro and veteran staff with vested options the opportunity to part with a portion of their shares to these purchasers.  Please keep this confidential and do not share any detail regarding this transaction with anyone. Those with eligible options will receive an email with more information. To those taking a break in August, have a restful holiday and return renewed and motivated for an amazing second half of the year. Sincerely, Yoni

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