Investing: 'Huge increase in customer demand'

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Since the start of the pandemic, social trading platforms like eToro have seen a huge increase in people wanting to invest online.

Video Transcript

YONI ASSIA: We think this is a great way to transition from the private to public markets for the next stage of growth of eToro. We’ve seen tremendous growth in 2020. We’ve grown 147% in revenues to more than $600 million, and then we saw a huge increase in customer demand globally during 2021. And we believe that becoming a public company will help us accelerate that growth globally, extend into new markets, and keep on innovating and building great products for our customers.

Now the putative valuation is around $10.4 billion, and that is more than 17 times your revenues last year. That looks quite a high valuation. You’re not a bit uncomfortable about that?

YONI ASSIA: Well, we have seen a perfect storm starting in 2021. We were one of the pioneers in crypto trading. We bought some bitcoins to our treasury 10 years before Elon Musk in 2011, and we enjoyed a hyper growth stage in 2017 and ’18 during the first crypto rally and are positioned very well to take advantage of crypto rally 2.0 with Bitcoin at all-times high. And at the same time we see the market’s at all-times high with the stock markets’ rally all around the world. And really a generational buying moment where customers from all around the world are just flocking into the market.

So just as an example, we had about 192,000 monthly average registrations to the platform in 2019. That grew to 440,000 a month in 2020, and that grew to 1.2 million new registrations to our social network only in January 2021. So we do see a tipping point of retail investors all around the world waking up to the markets, obviously with a very unique set of circumstances of zero interest rates, the democratization of investing, and we’re very excited to be really in the intersection of social media and trading and investing.

These are stunning numbers, but do you worry that a lot of the people coming onto the platform now, they’re probably fairly young. They’ve probably never experienced a stock-market crash before.

YONI ASSIA: The majority of our customers would tell us that this is the first time that they trade the markets. We try to educate our customers. We believe that our social network enables users to see what other people are doing and therefore learn from the most successful investors on the network. You can either trade on your own on eToro or you can automatically copy top traders from all around the world.

[INAUDIBLE], yeah. A lot of people don’t think that’s a very good practice to be encouraging, copy trading.

YONI ASSIA: I think we brought in the sharing economy to portfolio management, and I truly believe in the talent of people. We see about only less than 1% of our users will become successful investors over time. But when you look at the track record and some of the users on the platform that have been with us for five, six, seven years and generated double-digit returns over time consistently, I think it’s very hard to argue that these are talented individuals.

And again, not everyone can actually learn to be a successful investor on their own. I’ve been passionate about capital markets since I was 13. I look at the markets. I analyze the markets. We were early to cryptocurrency as well. But not everyone has that passion towards capital markets, and copy trading enables our users to simply copy the most successful investors. And this is, again, portfolio management just in a new form on the internet.

Now, another criticism that’s been leveled at you and some of your competitors, the likes of Robinhood, is that you’ve turned the serious business of stock trading into a game. What would you say to those critics?

YONI ASSIA: I think we should all be amazed and proud that a new generation is waking up to the markets. Retail participation in the trading markets is nearing an all-time high. Obviously at eToro we truly believe that retail investors should have a say and should be a part of the public markets. They’re called the public markets, so the public should take a part in it.

And I would generally also agree that platforms like eToro, digital platforms experiencing significant growth of customers from all over the world, we need to make sure that our customers are educated, that they understand that markets can also go down, not always go up, and make sure that we provide the best-possible tools for our customers to manage their investments successfully.