Online broker eToro in $10bn deal to go public with Spac

Online broker eToro has agreed to go public at a $10.4bn valuation after merging with a listed blank cheque company, as the investment platform seeks to capitalise on the recent digital trading boom.

EToro, which has more than 20m registered users, will combine with Fintech Acquisition Corp V, the special purpose acquisition company set up by banking tycoon Betsy Cohen, in one of the largest Spac deals of 2021 so far.

Under the terms of the deal, eToro will receive $250m from the pot raised by Cohen’s Spac in December and $650m from a group of institutional investors, which includes SoftBank Vision Fund 2 and Fidelity, to help the platform grow. 

The deal comes as Spac fundraising in the US — the largest market for these vehicles — is already closing in on the all-time high of $78bn reached last year. Spacs are targeting increasingly larger businesses as they strike deals at a frenzied pace.

The Israeli stockbroking and spread betting platform has more than 20m registered users, and reported more than 275 per cent growth in funded accounts in 2020, adding more than 5m new users over the year.

Amid the GameStop trading frenzy in January, the brokerage added more than 1m new customers in the first month of 2021 alone.

The platform has boomed in popularity with young investors — the average user is 34 — by offering the ability to buy fractions of shares, which allows traders to get started in markets with small amounts of money, as well as cryptocurrency trading. Its users are still overwhelmingly male, approximately 85 per cent, although eToro reported a more than 360 per cent rise in the number of female users on its platform in 2020.

EToro, which competes with other online brokerages such as Robinhood, has benefited from the recent surge in retail investing activity, as zero-commission trading drew locked-down young investors with more free time and capital into stock markets. 

Retail trading volumes have soared since the start of the pandemic, and more than 20 per cent of all trading volumes in the market are estimated to be retail, according to UBS Equity Research, more than double pre-pandemic levels. 

However, the platform has come under fire for positioning itself as a retail stock-trading platform in the UK, despite offering riskier trading products such as contracts for difference to customers. More than two-thirds of eToro customers who trade CFDs lose money. Eighty-five per cent of assets under administration by the platform were real assets, eToro said. 

Cohen, who has had a colourful career as one of the earliest female entrepreneurs in the commercial banking industry, has been a serial Spac investor over the past year.

The founder of Jefferson Bank, which she started in 1974, has recently used blank cheque companies to buy and list a series of private companies, including New York boutique investment bank Perella Weinberg Partners, CardConnect and Intermex Wire Transfer.