eToro set for $10bn listing through merger with blank cheque company

Company will be backed by Softbank's Vision Fund II, Fidelity and others

Yoni Assia, chief executive of eToro. The company, which is set to list in the US following a merger with a 'blank cheque' company, made $605 million in gross revenue in 2020. Bloomberg

Trading platform eToro, a rival to Robinhood Markets, plans to go public via a merger with a blank-cheque company led by serial dealmaker Betsy Cohen.

The agreement with FinTech Acquisition Corp V values the combined company at about $10.4 billion, according to a statement on Tuesday. The companies are raising about $650 million in equity to support the deal.

Investors in the equity transaction included ION Investment Group, Softbank Vision Fund II, Third Point, Fidelity Management & Research and Wellington Management, the statement shows.

The company became a member of the US Financial Industry Regulatory Authority, or Finra, in the last year and is expected to start providing stock-trading services in the US in the second half of 2021, according to the statement.

Founded in Israel in 2007, eToro has 20 million registered users in dozens of countries, according to its website. It expanded into the US in 2018.

In the past year, brokerages have seen a surge in retail investors, who made up about 20 per cent of US equity trading in 2020, according to Bloomberg Intelligence data. One of the major beneficiaries has been Robinhood, the California-based brokerage that eToro will compete against as it seeks to grow in the US.

Robinhood has attracted increased scrutiny from watchdogs and politicians over the past year, including for how it attracts users and for its customer service practices.

“As we grow our business I think we understand the level of responsibility that we have for customers to understand the importance of risk management and education on the platform,” eToro chief executive Yoni Assia said in an interview.

Mr Assia also said that the company will consider adding options trading to its platform.

Like its rivals, eToro offers zero-commission trading. Unlike US firms, eToro doesn’t make money by customer orders to trading firms that fulfill them in a business called payment-for-order flow, a practice that is prohibited in Europe. Instead, eToro primarily pockets a spread between the price its pays for securities and the price it passes along to customers.

Mr Assia said the company will keep its options open on new revenue streams as it expands its US presence.

It also brands itself as a social trading network, where investors can share their opinions and market exploits, and copy bets made by the best performers on the system.

“eToro is a social investment and social trading company where people actually learn, not a game where you trade as much as you can and then go – bingo,” said Ms Cohen, chairman of Fintech Acquisition Corp V.

The special purpose acquisition company raised $250 million in December. Ms Cohen, its chairman, has been involved with several blank-cheque companies, including one taking boutique investment bank Perella Weinberg Partners public.