The rush of technology companies going public via SPAC IPOs shows no sign of abating with news Etoro, one of the world’s most popular financial markets trading platforms, is to list on the Nasdaq via a $10 billion “blank cheque” merger. The company, and the online trading sector as a whole, has been one of the beneficiaries of lockdown restrictions over the past year.
It’s now decided to strike while the iron is hot, both in terms of its own performance, and investor appetite for listed technology company. eToro added a total of 1.2 million new users over just January as interest in trading from small, private investors surged. Last year eToro’s gross revenues shot up by 147% to $605 million.
The dramatic targeting of short hedge fund positions by coordinated crowds of small investors organised by the #WallStreetBets subreddit group attracted widespread media coverage in January and February. That in turn appears to have attracted growing numbers of new accounts as retail investors jumped on the WallStreetBets bandwagon, or had their interest piqued more generally.
eToro’s platform executed over 75 million trades in January – a huge leap on 2019 monthly averages of eight million. Even before the GameStop mania of early 2021, which has seen tens of thousands of small investors take coordinated positions against hedge funds, painted as the bad guys of the financial establishment, interest in investing and trading among private individuals had grown in 2020.
With more time on their hands at home over 2020 and the first months 2021, especially a younger demographic of Millennials and even Gen Z, have shown an interest in trading and investing. eToro added 5 million new accounts last year representing growth of around 25%.
While that might generally be considered a positive, there is also evidence these inexperienced traders are at more risk of losing money by following crowds blindly and taking on high risk speculative positions. Many retail trading platforms, including eToro, act as market makers, which means they take the other side of the trade to their users. That in turn means they can often make money when their users lose money and not only through the buy-sell margin on trades.
Israeli-owned eToro SPAC IPO will take place via a special purpose acquisition company called Fintech Acquisition Corp V after the two companies struck a merger agreement. The news saw the share price of the SPAC close up 43.4% in New York trading yesterday.
eToro’s co-founder and chief executive Yoni Assia called the impending IPO a “momentous milestone” in the company’s evolution. He went on to say:
“Our users come to eToro to invest, but also to communicate with each other, to see, follow and automatically copy successful investors . . . We created a new category of wealth management — social investing — and we are dominating the market, as evidenced by our rapid expansion.”