Israeli online trading platform eToro has completed a $250 million financing round at a company valuation of $3.5 billion. Although the financing has been officially closed now, market sources believe the money from investors including SoftBank, ION Trading and Velvet Sea has already reached eToro over the past few years, through an advanced investment agreement.
eToro was one of the big beneficiaries of the Covid pandemic with online trading platforms gaining huge valuations. In eToro's most recent financing round in March 2018 when it raised $100 million, it was given a valuation of $800 million. But in 2021, eToro signed a SPAC merger deal with Betsy Cohen's FinTech Acquisition Corp V, at a company valuation of $10.5 billion, although several months late the valuation was cut to $8.8 billion and now its valuation has fallen dramatically to $3.5 billion.
eToro has also reported a fall in revenue from $972 million in 2021 to $631 million last year - similar to 2020 levels. The company expressed satisfaction with its financial performance despite the 35% drop in revenue. The reason for this is that trading activity in cryptocurrencies has decreased significantly with traders instead switching to investing in commodities such as natural gas, crude oil and gold. Commissions from trading in cryptocurrency assets accounted for 60% of the company's revenue in 2021, and last year it was reduced to only 19%. The number trading accounts as of the end of December 2022 stood at 2.8 million, up 16% from the end of 2021, and up 180% from two years ago.
eToro CFO Meron Shani said, "The range of investment products and assets that we offer our clients has contributed to revenue from stocks, ETFs and commodities partially offsetting the fall in revenue from cryptocurrencies in 2022. It is also worth noting that we have not been plagued by the liquidity concerns that have troubled many in the cryptocurrency industry. In 2022, we continued to increase our user base despite negative sentiment in the market and the reduction of our marketing expenses. Our core activity is profitable and our balance sheet is strong."
eToro's new financing round gives it a multiple of 5.5 times the revenue, higher than the 4.87 multiple that Coinbase earns from investors, but lower than the 6.3 multiple of the revenue earned by Robinhood.
Even though the company has implemented a streamlining process that included the dismissal of over 100 employees and big cuts in marketing expenses, eToro is not disclosing profitability figures. In 2021 presented a decrease in EBITDA profitability due to a significant increase in marketing budgets.
eToro was founded by CEO Yoni Assia, Ronen Assia and David Ring and in 2021 former Supervisor of Banks Hedva Bar was appointed deputy CEO and Global COO.
Yoni Assia said, "Towards the end of the first quarter of 2023, we see an improvement in total revenue and profitability compared with the last quarter of 2022, as well as an increase in the volume of trading activity among our customers. 2023 began positively when the markets responded positively to "less bad" news and trading among private investors has reached an all-time high."
Published by Globes, Israel business news - en.globes.co.il - on March 21, 2023.
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