eToro launches US$500m IPO amid crypto melt-up
eToro launched marketing on Monday on its US$500m Nasdaq IPO after having carefully vetted the offering with investors, splitting the offering evenly between primary and secondary shares and electing to cornerstone the offering as extra protections of safety.
The decision to cornerstone the offering is a return to the safety-first approach used early last year by the likes of Viking and UL Solutions – while supportive, the risk for the issuer is being boxed in at the valuation agreed to with the cornerstone investor.
Goldman Sachs, Jefferies, UBS and Citigroup are joint bookrunners on the sale of 10m shares being marketed at US$46–$50 for pricing after the market close Tuesday, May 13. The online brokerage is selling 5m shares, with existing shareholders led by venture capital backers as well as founders Yoni and Ronen Assia selling the remaining 5m shares.
eToro is targeting a fully diluted equity market cap on the IPO of up to US$4.65bn, a significant step-up from the US$3.5bn valuation it fetched on a US$250m private round in March 2023.
On 2025 forecast results, eToro is targeting a 4.3–4.8 multiple of revenues and 11.0–12.5 multiple of Ebitda, below the 6.4/15 and 13/25 at which Coinbase and Robinhood Markets currently trade – the crypto complex is melting up amid economic uncertainty and a US dollar in retreat.
BlackRock agreed upfront to invest US$100m (2m shares) in the offering and another 5% (500,000 shares) is being held back for a directed share programme to be administered by company executives.
The cornerstone investment by BlackRock arose from extensive rounds of pre-marketing conducted by investment banks ahead of the public launch of the IPO.
“We’ve seen them three times in the past year,” said the head of equity capital markets at one long only buyside firm. “Some of that was one-off, and some of that was two rounds of formal testing-the-waters. The offering is a little smaller than what they telegraphed and the valuation a little lower. It seems like they are doing all the technical things right to make the offering work.”
Exploiting bitcoin bump
eToro is benefiting from increased investor interest in crypto trading. Over the past month, bitcoin prices have surged by one-third to US$102,000. Shares of close public comparable Robinhood have bounced by 50%-plus from their lows in early April to US$54.25.
For its first quarter ended March 31, the online brokerage expects to report adjusted Ebitda and net contributions of US$76m–$80m and US$214m–$217m, based on preliminary unaudited results provided at launch. Those results compare with US$87m and US$201m in the comparable year-earlier period.
The company added about 80,000 accounts in the first quarter to end the period with 3.58m funded accounts, about 70% of which are based in Europe – the crypto-heavy business and big international exposure are two risks on fundamentals.
Of the US$787m in net contributions eToro generated last year, about 25% were related to crypto trading, 40% to equities, commodities and currency trading, 25% to net interest earned, and the balance to eToro Money, its money management platform.
Net contributions are a measure of total revenues less the costs of revenues from crypto and other assets.
eToro separately revealed that it plans to put in a place a US$250m revolving credit facility, providing it with incremental liquidity on top of the US$793.1m of cash it hopes to have after the IPO, based on midpoint pricing.
eToro does not really need the money and is using the offering to allow insiders to cash out at a slight premium to the valuation invested. The inclusion of BlackRock as a cornerstone investor serves to help validate the valuation being targeted on the IPO as well as tamp down the demand needed from other investors.