eToro will go public. The broker is valued at $ 10 billion

Famous, among others with very intensive marketing eToro broker goes to the stock exchange. However, there will be no traditional issue of shares, but a combination of the so-called SPAC company - that is, a kind of "empty" company that has a guaranteed place on Wall Street. 

SPAC is the so-called special purpose companies. They are listed on the stock exchange, but they do not operate, but are waiting for willing ones who want to take their place on the trading floor - for a fee, of course, but still it is an option that is less risky, easier and cheaper than issuing shares. 

SPAC companies, also known as "Blank checking companies" have stocks that you can simply take over and rename the stock to have the target company listed on Wall Street. So it is also a much faster operation, because you can choose the market conditions of the "debut", without fear that it will happen just in time of the bear market and there will be problems with getting the right price for the shares.

2020 is a fantastic year for brokers

Meanwhile, there should be no problems with a solid valuation, because the past year was a record year for brokers in every respect. It is proved by, among others success Polish XTB and listing of the company on the Stock Exchange. A year ago, you had to pay PLN 3,47 for each XTB share, today they cost PLN 17,35, and at the peak at the end of July it was even PLN 28,40. 

XTB stock chart, D1 interval. Source: Trading View

No wonder, as the profits were impressive. In 2020 XTB generated the highest operating income in the history of the company - PLN 797,7 million (increase by 233,4% compared to 2019), consolidated net profit - PLN 402,4 million (increase by 597,4% y / y) and EBIT - PLN 516,3 million (increase by 689,3% y / y). XTB also acquired a record number of 112 thousand. new clients (an increase by 206,5% compared to the number of clients acquired in 2019). 

How much is eToro worth?

World leaders did even better, including eToro. After acquiring 5 million new clients in 2020, the broker already has 20 million active users. If we assume that each of them is worth around $ 500 for the company (the average for brokers), then eToro's valuation at USD 10 billion will not differ from the market average. On the other hand, when the company's shareholding changed last year, all shares were valued at $ 2,5 billion. Going to the stock exchange - especially Wall Street - is always valued with an interest, but is it so high? 

The company, founded by brothers Yoni and Ronen Assia, has been operating since 2007. In recent months, however, it has been registering so many new clients that technical faults have started to appear - the network has not kept up with servicing new traders, and often their transactions as well. As a result, the minimum first deposit was raised to PLN 1. USD, because many customers started with little capital and burdened the network with microtransactions. In January this year, it was also decided to close the leveraged cryptocurrency market, because eToro analysts decided that in the long run they would not be able to secure highly leveraged positions of clients in Bitcoinach, ETH and other cryptocurrencies.

While this might appear to be a failure for the company, analysts believe that such actions only testify to eToro's solid financial foundations and its management's common-sense approach to risk assessment and risk assessment that may - even in the distant future - make the company will have problems with liquidity.

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