Last week, it came to light that crypto and stock trading company eToro is planning an Initial Public Offering (IPO) in 2025. An IPO is a major financial event whereby a private company sells its shares to the public for the first time and becomes a publicly-traded company.
Looking for more information on the eToro IPO? Here’s everything we know so far.
Who is eToro?
eToro is an Israeli FinTech company that offers a trading and investing platform. It was founded in 2007 with the goal of enabling everyone to trade and invest in a simple and transparent way.
Through its platform, one can trade a wide range of assets including stocks, exchange-traded funds (ETFs), crypto-assets, and commodities. Investors can also copy other traders via its CopyTrader feature.
Today, eToro’s footprint is extensive – it currently operates in over 100 countries worldwide. According to the company, it has 35 million users around the world at present.
In 2023, eToro raised $250 million from a range of investors including SoftBank and ION Group. This put its valuation at $3.5 billion.
How does eToro make money?
eToro makes money in several ways including:
- Trading fees: eToro charges some users (depending on where they are based) fees to buy and sell securities.
- Spreads: Spreads are the difference between the price to buy and sell a security.
- Currency conversion fees: If your base currency is not USD, eToro will charge a fee to convert your money to USD.
- Withdrawal fees: The company charges fees to withdraw money externally.
- Inactivity fees: The company charges a monthly fee to those who don’t log in for 12 months.
The IPO details
At this stage, we don’t have a lot of information on the eToro IPO. What we do know, however, is that:
- The company is planning to list in the US (it has filed confidential IPO documents with the US Securities and Exchange Commission (SEC)).
- The IPO could take place as early as Q2 2025.
- The company is targeting a $5 billion valuation.
It’s worth pointing out that at this stage, there is no guarantee that eToro’s IPO will go ahead. In the past, the company has made plans to go public but then pulled the plug.
How to buy shares in the eToro IPO
Currently, we don’t know if retail investors will be able to participate in eToro’s IPO. It may be open to retail investors, but I wouldn’t be surprised if it’s not.
If it’s not, retail investors looking to buy eToro shares will have to buy them once they begin trading. And they may be trading at a higher price than the IPO price.
Will eToro shares be worth buying?
It’s hard to know if eToro shares will be worth buying at this stage. That’s because we don’t have access to the company’s full financials and its rate of growth right now.
One thing we know, however, is that the company generated revenue of $630 million in 2023. If we take that figure (which is obviously a little out of date now) and compare it to the planned $5 billion valuation, we get a price-to-sales ratio of 7.9.
That multiple doesn’t look particularly high on a relative basis. Currently, rival Robinhood Markets trades on a trailing price-to-sales ratio of 22.8.
So, eToro shares could potentially offer some value. But we really need more information to do a proper analysis of the company.
What are the risks?
It’s worth noting that there are a few risks to consider with eToro shares.
One is in relation to competition. eToro operates in a very competitive industry so there is no guarantee that it will continue to have success. Not only is it up against FinTech platforms such as Robinhood, Trading 212, and Freetrade, but it is also up against larger, more powerful players such as Charles Schwab and Fidelity.
Another risk is financial market volatility. If financial markets were to experience a meltdown, interest in trading and investing could dissipate. This could lead to lower revenue for the company.
Finally, it’s worth highlighting regulatory risk. Financial services is a highly regulated industry and eToro’s services could be vulnerable to regulatory intervention. In the past, the company has been fined by the SEC.
As always, it’s important to understand the risks before investing in a company.
Disclaimer: Edward Sheldon produces content for eToro on a freelance basis
Based in London, Edward is a distinguished investment writer with an extensive client portfolio comprising a diverse array of prominent financial services firms across the globe. With over 15 years of hands-on experience in private wealth management and institutional asset management, both in the UK and Australia, he possesses a profound understanding of the finance industry.
Before establishing himself as a writer, Edward earned a Commerce degree from the prestigious University of Melbourne. Complementing his academic background, he holds the esteemed Investment Management Certificate (IMC) and is a proud holder of the Chartered Financial Analyst (CFA) qualification.
Widely recognized as a sought-after investment expert, Edward’s insightful perspectives and analyses have been featured on sites such as BlackRock, Credit Suisse, WisdomTree, Motley Fool, eToro, and CMC Markets, among others.
You can contact Ed at edward@goodmoneyguide.com
