eToro pursues US listing, but revenue streams remain Eurocentric

Israeli social trading network eToro is targeting a valuation of over $3.5 billion as it mulls a listing in the United States, despite the UK being its largest market.

The broker is considering an initial public offering (IPO) in either New York or London, according to Yoni Assia, eToro’s founder and CEO, who spoke to the Financial Times. The plan comes as the platform saw a surge in retail trading, reaching levels not seen since the meme stock craze of 2021.

Assia highlighted the appeal of the US market, noting that retail investors in the UK and Germany show a strong preference for trading US stocks due to the market’s deep liquidity. However, eToro’s European and UK market focus, where nearly 70% of its revenues are generated, might influence a decision to opt for a London listing, providing a boost to a market currently facing challenges in attracting IPOs.

The move towards a New York IPO highlights the broader trend of European tech companies being attracted to the US market, perceived to offer higher valuations and a deeper pool of capital. Recent months have seen companies like insurer Aspen, commodity broker Marex, and gambling group Flutter either IPO in New York or shift their listings from London.

Assia is exploring the optimal timing for eToro’s market debut, anticipating a valuation increase from the $3.5 billion mark set in the last funding round a year ago. The company is also undecided on whether to allow customers to invest directly in its IPO, a strategy employed by Robinhood and contemplated by Reddit for their listings.

The brokerage benefits from a retail trading boom, driven by record highs in US and European stock markets and bitcoin prices. eToro offers trading in cryptocurrencies, stocks, currencies, and commodities, experiencing activity levels comparable to the 2021 trading frenzy driven by investments in companies like GameStop and AMC.

Reflecting on the lessons learned from the abandoned SPAC merger, which had initially valued eToro at $10 billion, Assia views the experience as educational. Despite the setback, eToro raised $250 million in March 2023 at a valuation of $3.5 billion. The funding round was led by ION Group and Softbank’s Vision Fund 2, with participation from Velvet Sea Ventures and several other existing investors.