eToro aims at $5b IPO valuation

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The company is buoyed by improved profits, and the expectation of more liberal regulation in US financial markets when Donald Trump becomes president.

At the end of last week, the Bloomberg website reported that Israel online trading platform eToro was examining an IPO in New York, and to that end had hired investment bank Goldman Sachs. Sources inform "Globes" that the company is aiming at a valuation of $5 billion.

This will not be the first time that eToro has tried to reach the stock exchange. In the boom year of 2021, the company dreamt of a SPAC merger at a valuation of $10.4 billion, but that dream faded as the capital market cooled.

In March this year, it was reported that eToro was gearing up for a flotation, after it raised money at a valuation of $3.5 billion in 2023. The revised valuation is based on an expected rise in profits. Last year, eToro posted EBITDA of $107 million, after posting a loss of over $40 million the previous year. The company now expects to post a larger profit for this year, which should help it to recruit investment institutions to its planned flotation in the second quarter of 2025.

No comment was forthcoming from eToro, but in an article on the previous flotation attempt in March, the company’s founder and CEO Yoni Assia told "The Financial Times": "So far 2024 starts to feel a bit like 2021. Markets are at all-time highs, we’ve seen a significant increase in engagement in stock trading."

eToro has received a push from the cryptocurrency market, which is about to close a phenomenal year. Last week, the price of Bitcoin surpassed $100,000 for the first time. It has since fallen slightly, but for the year to date the leading cryptocurrency has posted a return of no less than 125%.

eToro and Goldman Sachs have been impressed by the rise in stocks of trading platforms such as Coinbase, which have benefitted from the rise in cryptocurrencies. Coinbase’s share price has risen 119% so far this year, while that of Robinhood has risen 237%. Robinhood, eToro’s main competitor, is traded at a multiple of 55 times its EBITDA. Were eToro traded today at the same multiple, it would have a market cap of nearly $6 billion on the basis of last year’s EBITDA.

Last year, eToro reported revenue of $630 million, lower than in 2022, when revenue was $631 million, and almost half the 2021 revenue figure of $1.2 billion. All the same, the company is encouraged by the improvement in profitability, and plans to talk to the US Securities and Exchange Commission about being allowed to facilitate trade in cryptocurrencies on its platform, and to expand its portfolio of products in ETFs and mutual funds, and even to offer pension plans. eToro recently acquired an Australian company called Spaceship, an app for managing pension investments, for A$80 million. ($51 million), and it has a partnership with a UK pension fund.

"Trump’s entry into the White House and the nomination of Paul Atkins, who has been a consultant to several crypto companies, as chairman of the SEC, signal that the US market is going in a more liberal direction as far as regulation is concerned," says Adam Benayoun, founding partner of Collider Ventures, which invests in crypto and blockchain companies. "There’ll be a more permissive policy on mergers and acquisitions that will boost activity in that area next year, and many companies are warming up on the starting line with a view to a flotation. I don’t recall a period in which the chairman of the SEC had a background of advising cryptocurrency companies. Now, companies that have waited for several years to embark on a flotation, such as Circle, Fireblocks, and eToro, are warming up."

Published by Globes, Israel business news - en.globes.co.il - on December 9, 2024.

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