Israeli social trading network eToro has secured $250 million in new funding, resulting in a $3.5 billion valuation. This funding was obtained through an Advance Investment Agreement (AIA) that eToro entered into in February 2021 as part of its proposed merger with Special Purpose Acquisition Company (SPAC). The funding round also involved FinTech Acquisition Corps. V. ION Group, SoftBank Vision Fund 2, Velvet Sea Ventures, and several other existing investors.
In March 2021, eToro announced plans to go public through the SPAC merger with a $10.4 billion valuation, but the deal fell through in July of the same year due to both parties’ failure to meet specific conditions outlined in their agreement. Following the deal’s failure, FinTech Acquisition Corp. V announced its dissolution and liquidation in November 2021, with plans to close down by December 9, 2022. The SPAC company, owned by financier Betsy Cohen, founder of Jefferson Bank and The Bancorp, stated that it would return the $250 million it collected from investors.
According to the latest release, eToro reported a significant decline of about 49% in generated commissions in its financial results released on Tuesday.
In 2022, total commissions came in at $631 million, which is a stark decrease from the $1.23 billion generated at the end of 2021. This decline occurred despite a 17% year-over-year growth in eToro’s funded accounts, which increased to 2.8 million in 2022 from 2.4 million in the previous year. However, compared to 2020, the total commissions only grew by 5%.
The Graph Of Uncertainty
eToro’s report revealed that almost half of the commissions generated in 2022, which amounted to 48%, came from equity trading, while over a quarter (27%) were from commodities trading. Additionally, commissions from cryptocurrency trading dropped to 19%, and currencies accounted for only 6% of eToro’s revenue.
The decline in commissions occurred during a year when the global cryptocurrency industry experienced several chaotic events, including the collapse of Terra-LUNA and the cryptocurrency exchange FTX, which affected digital asset lenders like Genesis.
Despite this, Meron Shani, eToro’s CFO, reassured investors that the company’s “underlying business is profitable, and our balance is strong.”
Moreover, Yoni Assia, eToro’s CEO, emphasized that the company had experienced an improvement in total commissions and profitability compared to the previous quarter, with higher engagement and trading activity from its users year-to-date.
“The diversified nature of our multi-asset product offering ensured that commissions from equities and commodities partially offset the decrease in commissions from crypto assets in 2022,” Shani noted.
“It’s also worth noting that we were not impacted by the liquidity concerns which plagued many in the crypto industry,” the CFO said.