eToro IPO is getting delayed due to regulatory backlog amid SPACs boom

abdelaziz Fathi

The merger between social investment platform, eToro and US SPAC Fintech Acquisition Corp. has been delayed until the fourth quarter of 2021, the Israeli firm said in its most recent filings with the U.S. Securities and Exchange Commission.

etoro

Going public through a blank-cheque company was originally scheduled for a Q3 closing at a massive $10.4 billion valuation. However, meeting investors to pitch a direct listing may have hit a bump as the SPAC boom might be fading away.

Although the merger plans have yet to be completed, the share of the SPAC has suffered low demand compared to where it had been when Etoro originally revealed its IPO plan. As of writing, the stock is trading at $10.34, down 32 percent off the peak it hit in March at $15.29.

“It is currently anticipated that the merger will be consummated in the fourth quarter of 2021. The closing of the transactions is subject to the receipt of the requisite approval of the FTV stockholders described in this proxy statement/prospectus. The closing of the transactions is also subject to other customary closing conditions, including the receipt of the requisite approval by the eToro shareholders,” the SEC’s filing reads.

In essence, a SPAC is a shell company that lists on a stock exchange with the purpose of buying another business and taking it public without consuming the time, costs and regulatory oversight required for traditional IPOs.

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.

eToro was 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, which earned $264 million from crypto trading commissions in Q2 2021, is now competing with the likes of Robinhood, Vanguard, E-Trade in the US after it secured the membership of Financial Industry Regulatory Authority, Inc. (FINRA). Additionally, it allowed US customers to trade stocks at no cost in July, ramping up the intensity of the brokers’ fight to eliminate trading commissions.

In eToro’s existing markets, the company’s 20 million-plus users are able to trade and hold more than 1,500 markets, including stocks, bonds, cryptocurrencies, forex, commodities and more.

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