eToro SPAC Stock Drops Below $10 as Wall Street Debut Delayed Again

Israeli trading platform eToro is postponing its plans to go public via a blank check merger with Betsy Cohen’s Fintech Acquisition Corp to 2022, Israeli news outlet Calcalist revealed on Monday.

The company first announced its initial plans to debut during the third quarter through a $10.4 billion merger, reflecting an enterprise value of $9.6 billion. Then, eToro delayed the move to go public to the fourth quarter of this year, citing regulators’ backlog in approving SPAC listings.

Once approved, SPAC shareholders need to vote on the merger transaction, which takes around three weeks, and then a few more days to finalize. Given this timeline and where eToro is today, the private investment public equity (PIPE) investors can cancel their participation in the deal, or demand a change in the pricing. But Calcalist confirmed they plan to proceed with the same valuation to conclude the deal.

eToro is planning to raise as much as $250 million, with the rest of the capital coming from external investors. The 14-year-old Israeli company has already received backing from ION Investment Group, Softbank, Fidelity Management and Research Co, and Wellington Management. The companies are predicted to inject $650 million into the merged company.

eToro told the business newspaper they are still “in a process of transition into a public company by merging with the SPAC FinTech V and we are working with all the relevant bodies in order to complete the process as soon as possible.”

Retail traders become less interested in trading

The price of the SPAC stock (NASDAQ:FTCV) has lost about one-third of its value over the past nine months. The sentiment surrounding the stock has weakened further since the company published a relatively tough set of Q3 results in late November.

The multi-asset brokerage company posted worse-than-expected net income triggered by a 94 percent year-over-year increase in its operational expenses.

eToro has been among the biggest beneficiaries of the retail investing COVID-19 boom. While its social investing product did most of the success since its inception 15 years ago, cryptocurrency trading on the platform took off. Trading commissions generated from digital asset trading accounted for nearly two thirds of the total commissions eToro earned in 2021.

But in the third quarter, crypto trading activity declined from record highs earlier in the year, leading to considerably fewer new funded accounts.

Summing up, eToro reported a net loss of $98 million, primarily due to a non-cash charge of $60 million in stock-based compensation for its employees and $11 million of transaction costs related to the business combination with FTCV.

There also appears to be some regulatory concerns for eToro. Many celebrities were caught backing SPACs, which have raised more than $70 billion in 2020. That sum was greater than all the funds that the sector raised in the past 10 years.

The SEC warned that SPACs endorsements could be illegal if its promoters do not disclose the compensation they received in exchange for the promotion. The warning marks an effort from the US top watchdog to address what has become a recent trend.