The $20 Question: Will eToro's IPO Share Price Fuel Its Global Expansion?

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Industry Benchmarks and Comparisons​

When looking at past IPOs in the fintech sector, companies like Robinhood and Coinbase offer some parallels. Robinhood, a platform that, like eToro, democratizes investing for retail investors, went public at a valuation of around $32 billion, with an initial share price of $38. Coinbase, a leading cryptocurrency exchange platform, debuted at a valuation close to $86 billion, with an opening price of $381 per share. However, these valuations were significantly influenced by the market conditions at the time of their IPOs, which were characterized by high investor enthusiasm for tech and fintech stocks.

eToro's Financial Health​

eToro reported $630 million in revenue for 2023 and an EBITDA of over $100 million, indicating strong profitability. With 35.5 million registered users and significant assets under administration, eToro has a solid user base and revenue model, primarily driven by trading fees and spreads.

Market Conditions​

The current market conditions, characterized by volatility and a more cautious approach to tech and fintech IPOs compared to the peak of the IPO boom in 2020 and 2021, suggest a more conservative valuation might be appropriate. The market has seen a recalibration of valuations post the IPO frenzy, with investors paying closer attention to profitability and sustainable business models.

Estimation of IPO Price​

Considering eToro's last private valuation of $3.5 billion, its financial health, and the current market environment, a conservative approach would suggest a potential IPO valuation in the range of $4 billion to $6 billion, as previously estimated. If we take the midpoint of this range, $5 billion, as a working estimate for the company's IPO valuation and assume eToro decides to offer 10% of its company in the IPO, this would translate to $500 million raised in the IPO.

Assuming eToro issues shares in a way that is somewhat comparable to similar fintech IPOs, the price per share can be estimated by dividing the total amount raised by the number of shares offered. Without the exact number of shares to be offered, this part of the calculation involves speculation. However, if we were to speculate that eToro might offer around 25 million shares (a hypothetical number for illustrative purposes), this would result in an IPO price of around $20 per share ($500 million / 25 million shares).

Conclusion​

It's important to note that this estimation is highly speculative and based on a series of assumptions that may not reflect the final IPO details. The actual IPO price will be determined by a complex interplay of market demand, investor sentiment, and the company's strategic decisions closer to the listing date. Potential investors should look for the S-1 filing and subsequent updates from eToro and its underwriters for the most accurate and current information leading up to the IPO.