Before Robinhood can go public, another millennial trading platform announced it was going public.
eToro announced Tuesday morning that it was merging with the Special Purpose Acquisition Company (SPAC). Fintech Acquisition Corp. V. (Nasdaq: FTCV). In pre-market trading, FTCV stocks rose 20% instantly. This is a reversal from other SPAC announcements that have recently received more muted reactions.
When can you buy eToro stocks? What is Fintech Acquisition Corp. V?
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The final merger agreement is expected to close in the third quarter of 2021. At this point, eToro will likely change its ticker symbols to something similar to the company.
Until then, you can effectively own eToro by acquiring Fintech Acquisition Corp V. The SPAC will contribute $ 250 million to eToro while the company will receive $ 650 million from Softbank, Third Point and Fidelity for a private investment in public equity (PIPE).
The merger values eToro at $ 10.4 billion based on cash revenues.
eToro and FTCV: 5 Facts You Need To Know
With FTCV up 20% in pre-market trades, investors are clearly excited about the prospect of eToro and its valuation in the business. So let’s examine what sets this SPAC apart.
- Revenue of $ 605 million in 2020: That is 147% growth compared to the previous year.
- 75 million: Monthly trades in January 2021, a nearly ten-fold improvement over eToro’s average monthly trading volume of 7 million in 2019.
- 34 years: The average age of eToro users. Investors loved Rohinhood and its appeal to millennials. eToro has a similar demographic trend and is particularly attractive to younger investors because of its social trading features.
- 16%: Percentage of customer assets in cryptocurrency. While eToro started out with a focus on crypto assets (63% of the assets were in crypto in 2017), it has diversified successfully. Today, most client assets (44%) are stocks.
- $ 2.5 billion: The company’s forecast revenue in 2025.
The Bear Fall: Why Avoid FTCV Today?
There are some very impressive numbers in eToro’s announcement, but there are some warning signs.
- Revenue was reduced in 2019: EToro’s revenue declined 34% between 2018 and 2018. The reason? The company relied heavily on revenue from crypto assets. As that market drained, eToro’s revenue fell.
- This could happen again: While the company cites the 2019 drop in sales as a one-off event, trading stocks could also peak today, seeing declines. If stocks fell over an extended period of time, it could take stock trading – and eToro’s revenue as well – to far lower levels.
It’s smart for startups like eToro and Robinhood to go public at a time of increased investor interest. However, when every company in a category goes public, it is wise to ask yourself whether recent growth rates are really sustainable.
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