Stock brokerage platform eToro is receiving attention from bankers and investors regarding a public market listing following its decision to abandon plans for a public debut through a merger with a blank-check company, CEO Yoni Assia informed CNBC.
“We definitely are eyeing the public markets,” Assia revealed to CNBC in an exclusive interview last week. “I definitely see us becoming eventually a public company.” “When is the ideal time to do that? We’re always evaluating the right opportunity at the right time and the right market,” he elaborated.
Assia highlighted that his brokerage firm has cultivated strong relationships with exchanges, including the Nasdaq stock exchange. EToro has already made strides towards becoming a public entity, he suggested, indicating that the question of listing is more about timing than feasibility. “It’s our business, right? Retail investors come to eToro to buy shares of a public company. So we’re happy to engage and build those relationships over time as we scale more.”
Data provided exclusively to CNBC by eToro indicates that the company generated $630 million in revenue in 2023, closely aligning with the $631 million it earned in 2022.
However, the company reported profitability for the first time in 2023, revealing $100 million in EBITDA (earnings before interest, tax, depreciation, and amortization).
EToro did not furnish a comparable profit figure for 2022.
EToro primarily relies on trading-related fees, such as spreads on buy and sell orders, as well as fees for non-trading activities like money withdrawals and currency conversion. It also generates revenue from a premium membership product called eToro Club. This membership model, while valuable, comes at a significant cost, with the lowest tier priced at $5,000.
EToro Club offers users a more personalized service based on their trading behaviors, along with reduced fees, discounts, and crypto yields known as “staking” rewards. As of now, eToro boasts 35.5 million registered users and over 3 million funded accounts. In 2023, the company surpassed $10 billion in total customer assets under administration, according to its financials.
Assia also revealed that eToro acquired a company named Deep, which specializes in content automation. This sector is one the company intends to heavily focus on in 2024. Assia highlighted eToro’s heavy use of AI in its operations, particularly in content creation and marketing. He mentioned that approximately 80% of all of eToro’s marketing content, graphics, and localization incorporate AI.
AI also plays a significant role in investing and trading, according to Assia, with the company placing substantial emphasis on integrating AI into the product experience. AI-related stocks have garnered considerable attention among eToro’s user base.
“If we think about AI, and what is the holy grail of AI for our customers, it’s generating alpha in the markets,” Assia told CNBC. AI has become a trending area for investors following the surge of interest surrounding ChatGPT, the AI chatbot developed by Microsoft-backed company OpenAI.
Learnings from the SPAC process
EToro, which enables users to trade stocks via an online platform, initially intended to go public through a merger with the special-purpose acquisition company, or SPAC, FinTech Acquisition Corp — owned by Bancorp founder Betsy Cohen.
A SPAC is essentially a listed shell company established to take another target company public. The trend witnessed significant popularity during a surge in such listings in 2020 and 2021, which saw companies from Virgin Orbit to Cazoo go public in highly anticipated deals. However, the fervor has since subsided.
However, eToro abandoned these plans, which would have valued the company at $8.8 billion. Assia, who claims to have started his trading journey at a young age, stated that eToro gained valuable insights from the experience, which saw FinTech Acquisition Corp falter and eventually dissolve.
“We’ve learned a lot from the experience, looking at public markets in the U.S. and seeing sort of the bubble burst,” Assia remarked. “We said 2022 is the year of education for customers to understand that the markets don’t always go up,” Assia noted. “And I think 2023 is probably an educational year around the globe.”
“When everybody’s pessimistic is when markets actually do go up.”
Since shelving its listing plans, eToro raised $250 million at a $3.5 billion valuation in March 2023 in a deal backed by SoftBank Vision Fund 2, ION Investment Group, and Velvet Sea Ventures. Additionally, in an exclusive deal reported by CNBC, eToro allowed early employees and investors to sell $120 million worth of stock to existing shareholders in a secondary share sale.
This deal valued the company slightly below $3.5 billion.
Financial technology companies have faced challenges over the past few years due to a rise in interest rates, which have adversely impacted some risk assets. However, more recently, companies have witnessed improved conditions in the public markets, with shares of Affirm and Coinbase experiencing significant gains.
Yet, this resurgence has not been mirrored in the private markets, which, overall, remain subdued compared to the levels reached during the peak of the 2020 and 2021 fintech boom. Assia noted that retail investors have not fully returned to the stock market yet and are still grappling with challenges stemming from the higher cost of living.
However, he anticipates improvements in 2024, with expectations of the U.S. Federal Reserve lowering interest rates. Assia stated that eToro focused heavily on product development in 2023, prioritizing enhancements such as a better-advanced trading experience and technical analysis features for its more dedicated user base.
