Itoro, the Israeli trading platform, was one of the biggest beneficiaries of the Corona epidemic when millions stayed at home and sought employment in the form of independent trading in commodities, stocks and cryptocurrencies. The hype, which also included giants like Coinbase and Robin Hood, led the trading platforms to accumulate an inflated value, until the bursting of the technology bubble last year brought them back to the ground of reality.
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In its last fundraising round held in 2018, the Israeli company was valued at $800 million. At the height of the 2021 IPO season, it aspired to hit a value of 10.5 billion through a merger with Betsy Cohen’s Spark Fund, and a few months later updated its value to 8.8 billion. Even earlier, it hoped to receive a high value in a private fundraising: in March 2021, Itoro reached an agreement with several new investors – including Softbank’s Vision 2 Fund, Fidelity, Third Point and West Coast Partners for a private fundraising before the offering (PIPE) of 900 million dollars At a value of $6.4 billion, according to research firm PitchBook.
The private fundraising round that began in 2021 dragged on the cliff of time until the beginning of this year, and now – the company announces its closure, to the extent of 250 million dollars and according to a company value of 3.5 billion, after the investors reached an agreement on the company’s value and the size of their holdings. The amount is believed to have been transferred in full to the company over the past few years, although the round was only a few weeks ago.
The investors could withdraw from the investment deal without penalty, but instead preferred to stay with the company while reducing the value to $3.5 billion. In February 2021, the company carried out a secondary round in which the existing shareholders sold their shares to Toby Global, Red Sharks Ventures, Aglai, and the Susquehanna Fund of billionaires Jeffrey Yass and Arthur Danczyk – one of the first supporters of the Kohlat Forum. As far as is known, no secondary shares were sold in the current round.
A decrease in revenue of 35% in 2022
Included in the round is Softbank’s Vision 2 Fund, represented in Israel by former Mossad head Yossi Cohen. The latter will not join the company’s board of directors and according to the assessment will not be involved in its activities at all. Ultimately, the deal was sewn up by Vision 2’s investment teams in London, the United Arab Emirates and New York. Other investors in the round are ION Trading, a London-based financial software company; and Velvet Sea, an American fund that invests in growth companies.
In the meantime, Itoro reports a drop in revenue from $972 million in 2021 to $631 million last year, an amount similar to what it brought in in all of 2020. The company shows satisfaction with the performance – despite the 35% drop in revenue. The trading activity in crypto-currencies did decrease significantly, but instead the traders switched to investing in commodity derivatives – such as natural gas, gold and crude oil. Collecting commissions from trading in crypto assets accounted for 60% of the company’s revenue in 2021, and last year it was reduced to only 19%. The trading accounts as of the end of December also stood at 2.8 million, an increase of 16% within a year and 180% within two years.
“The variety of products and investment assets we offer our clients contributed to the fact that income from shares, indices and commodities partially offset the decrease in income from crypto assets in 2022,” said Miron Shani, the company’s CFO in a press release. “It is also worth noting that we were not affected by the liquidity concerns that troubled many in the crypto industry. During 2022 we continued to increase our user base despite negative sentiment in the market and the reduction of our marketing expenses. Our core activity is profitable and our balance sheet is strong.”
Itoro’s new fundraising round gives it a multiple of 5.5 times the revenue, higher than the 4.87 multiple that Coinbase earns among investors, and lower than the 6.3 multiple of the revenue earned by Robin Hood.
However, even though the company went through a streamlining process that included the dismissal of more than a hundred employees as well as a real streamlining of marketing expenses, Baitoro is not disclosing the profitability figures this time. In 2021 it showed a decrease in EBITDA profitability due to a significant increase in marketing budgets.
Kofi Trading will come to the US already this year
For the past two years, Itoro has been running a campaign to expand penetration into the American market, an effort partnered by Hadva Bar, the former supervisor of banks in Israel. After launching trading options in ETFs and shares in the US, last year Itoro acquired Gatsby, an options trading platform and recently integrated it into its system under the Itoro brand. In addition, it acquired Bullsheet, a provider of investment portfolio management tools that is now exclusively designed for users The Israeli company. The company hopes that as early as this year they will be able to launch the copy-trading product in which Itoro became famous in Israel and Europe – a system that allows account holders to invest closely with influencers who are on the company’s social network. At the same time, the company is managing efforts to register for trading activities in digital assets in France, Italy, and New York , as well as obtaining permission to act as an investment broker in Abu Dhabi.
Hadva Bar / Photo: Ronen Fedida
“Towards the end of the first quarter of 2023, we saw an improvement in total revenue and profitability compared to the last quarter of 2022, as well as an increase in the volume of trading activity among our customers,” CEO and founder Yoni Asia said in a statement. “2023 began positively when the markets responded positively to “less bad” news. And trading among private investors has reached an all-time high.”