Mornin’, gents. Just a quick post to remind you of a Q4 FinTech deal you may have forgotten about… eToro + $FTCV.
TL;DR:
- eToro, founded in Israel in 2007, will merge with FTCV in Q4 of this year
- eToro is one of the largest retail trading platforms in the world with 25M users and $1B+ in FY21 revenue, larger than well-known platforms such as SoFi
- Valuation: $10.1B. EV/Rev multiple: 9.9x (2023)
- eToro has a first mover advantage in the international market.
- eToro trades at a deep discount to peers
Merger:
On March 16th, 2023, eToro struck a deal to bring the company public through Betsy Cohen’s FinTech Acquisition Corp V (ticker: FTCV) in Q4 2023. FTCV filed their fifth F-4/A last week, so — if history is any indicator — a merger vote date can be expected soon.
eToro will have an estimated equity value of $10.4B at closing. The transaction of $9.6B includes $250M in gross proceeds from FTCV’s cash trust and $650M from a fully committed PIPE at $10 per share.
Platform:
eToro is one of the world’s leading (and most undervalued) social trading and investment platforms. Like SoFi, Robinhood, and Coinbase, eToro provides access to:
- stocks
- index funds
- forex
- cryptocurrencies
Global:
One difference between eToro and its competition is its global reach. eToro has an ex-US focus with users in 140 countries. It’s a well-known global brand with 69% of funded accounts originating in Europe and 18% in Asia/Pacific. There are currently 24.8m total registered users on the platform.
Features:
The following unique platform features distinguish eToro:
- Stocks – Beginning Dec 1st, American investors can also invest in stocks on eToro (beta testing)
- Crypto – Traders can build a diversified portfolio with 17 popular coins.
- DeFi – eToro’s DeFi portfolio offers eleven DeFi crypto-assets, including Ether (ETH) and Uniswap (UNI).
- Copy trading – Investors can mirror the moves of popular investors and utilize that expertise to their advantage.
Financials:
eToro recently released Q3 2023 earnings. Financial highlights include:
- $222M revenue in Q3 2023 and reaffirmed guidance.
- Net trading income of $176 million, up 56% versus Q3 2020
- 2.14 million funded accounts as of September 30, 2023, up 152% compared with September 30, 2020
Revenue model:
eToro earns revenue through both trading and non-trading fees. In addition, they operate as a market maker, meaning eToro’s exposure to users’ trades is hedged.
Competition:
Here’s how eToro matches up against its peers using street projections sourced from atom.finance:
Comps:
1. SoFi (Social Finance) — $SOFI . Sofi is a fintech platform with a suite of features including zero commission investing. SoFi’s current valuation: $18.55B. EV/Rev multiples: 22.1x (2021E) and 10.3x (2023E).
eToro comp: Applying SOFI’s forward multiples to eToro implies a share price range of $15.41-$21.39. With FTCV trading at $10.40, this yields a potential upside of 47-104%.
2. Robinhood — $HOOD. Made infamous during the “meme stock” craze of January 2023, Robinhood offers zero commission stock and cryptocurrency trading. RH’s current valuation: $23.87B. EV/Rev multiples: 13.1x (2021E) and 7.6x (2023E).
eToro comp: Applying HOOD’s forward multiples to eToro implies a share price range of $11.56-$12.98. With FTCV trading at $10.40, this yields an increase of 10-24%.
3. Coinbase — $COIN. An eToro peer, Coinbase is one of the most popular and widely used cryptocurrency platforms, offering an easy platform for people to invest in crypto. CB’s current valuation: $70B. EV/Rev multiples: 10.1x (2021E) and 9.6x (2023E).
eToro comp: Applying COIN’s forward multiples to eToro implies a share price range of $10.17-14.41. With FTCV trading at $10.40, this yields an increase of -3-38%.
4. Bakkt — $BKKT. Bakkt allows users to purchase crypto and convert rewards points into cash. Bakkt has agreements with Starbucks, Google and Mastercard. Bakkt’s current valuation: $5.35B. EV/Rev multiples: 97.2x (2021E) and 15.0x (2023E).
eToro comp: Applying BKKT’s 2023E forward multiple to eToro implies a share price of $22.07. With FTCV trading at $10.40, this yields an increase of 111%.
In short, eToro is a full-service, EBITDA-positive investment platform generating greater revenue than SoFi, yet trading at half the valuation. Largely under the radar due to its more limited presence in the U.S., eToro trades at a significant discount to peers and offers incredible value in both the short- and long-term.
This article was written by u/rymor.
