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As equities and cryptocurrency boom, eToro is seizing the moment with both hands. The online trading platform has filed confidentially for a US initial public offering and is seeking a valuation of more than $5bn.
It is easy to see why, given the frenzy around rivals Robinhood Markets and Coinbase. Both stocks have been on a tear as bitcoin prices surged past $100,000 after the election of Donald Trump and a crypto-friendly Republican Congress in November. Coinbase has more than doubled in value over the past 12 months while Robinhood is up almost 340 per cent.
Like them, eToro offers zero-commission stock trading. The company also allows users to trade cryptocurrencies and do fractional trading. Unlike Robinhood, the company does not make money from selling its customers’ orders to market-makers such as Citadel Securities. Instead, it makes the bulk of its revenue from the bid-ask spreads — or the gap between buy and sell prices — on trades placed on its platform.
The Israel-based company is little known in the US, though, relative to its peers; its biggest market is the UK. Robinhood and Coinbase boast market capitalisations of $43bn and $74bn respectively. The $639mn of revenue eToro pulled in for 2023 is about a third of Robinhood’s and about a fifth of what Coinbase made that year.
EToro has also struggled to show consistent growth. The company had 3mn funded accounts at the end of 2023, up from the 2.8mn it reported in 2022. Yet revenue barely budged year on year and, indeed, was roughly half what it had made in a bumper 2021.
Robinhood and Coinbase have also had bumpy rides. But Robinhood in particular has been buoyed by a monstrous rally in equities and crypto trading in the final quarter of last year and by higher interest rates that boosted its net interest income. Its 2024 revenue is expected to grow by 54 per cent to reach $2.8bn, far above its 2021 peak.
That may explain why eToro is seeking a valuation of less than half what it sought in 2021 when it planned to go public through a later abandoned $10.4bn deal with a special purpose acquisition company. A $5bn valuation would equate to about 43 times eToro’s adjusted 2023 ebitda compared with Robinhood and Coinbase, which are trading at about 78 times.
For eToro, founded in 2007, finally becoming a public company would count as a win. And valuation multiples will move around as 2024 results are reported. Still, it is not guaranteed that a stock market boom will translate into an IPO boom, much less one that gives eToro the kind of valuation it once hoped for.
pan.yuk@ft.com
