Robinhood Rival Etoro Agrees to Sell Shares at Discounted Valuation for $120 Million

eToro, the stock trading platform, has agreed to a secondary share sale valued at $120 million. This transaction results in a slightly lower valuation for the company compared to the $3.5 billion it received in a primary funding round earlier this year.

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During the secondary share sale, early employees and angel investors were offered an opportunity to sell their shares to existing investors of eToro.

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It's important to note that this is a secondary share sale, indicating that no new shares were issued, and the company won't generate any income from this transaction. However, the sale provides insights into the current market price at which investors are willing to acquire shares of eToro.

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Last year, eToro abandoned its plans to go public through a merger with a blank-check company, Fintech V. The proposed deal would have valued the company at $10 billion, but changing market conditions, including a downturn in equity and crypto prices, resulted in a reassessment of investor interest in tech companies. Retail brokerages also faced a decline in trading activity during that period.

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Yoni Assia, CEO, and co-founder of eToro, emphasized the company's sustainable and profitable growth, making it an attractive investment opportunity for many investors. The secondary transaction allows existing shareholders and long-standing employees with vested options to sell a portion of their shares to interested purchasers.

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The recent funding round saw eToro raise $250 million from investors, resulting in a valuation of $3.5 billion. This valuation is significantly lower than the $10 billion sought during the company's previous bid to go public via a SPAC.

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Notable investors in the latest round included SoftBank Vision Fund 2, ION Investment Group, and Velvet Sea Ventures. The investment was made through an advance investment agreement, wherein investors pay in advance for shares that will be allocated at a later date, sometimes at a discount.

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EToro confirmed that it would convert this investment into equity since the SPAC deal did not proceed.

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Earlier this year, eToro formed a partnership with Twitter (now known as X), enabling users of the social media platform to access stock and crypto trading through "cashtags" searches. The company is looking to expand this partnership in various ways and has engaged in discussions with X CEO Linda Yaccarino to explore potential avenues for collaboration.

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eToro, like many online wealth management platforms, experienced a surge in demand during the Covid-19 pandemic, as people spent more time at home and had extra funds to invest in stocks and other assets.

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However, recent challenges have emerged for online brokerage platforms due to the rising cost of living, making it difficult for consumers to allocate funds to investments, as seen with the case of U.K. brokerage startup Freetrade, which reduced its valuation by 65% in a crowdfunding round, citing the "different market environment."

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