Fading frenzied demand for meme stocks and cryptocurrencies in the second quarter led user growth rates to decline sharply at online brokerage eToro, as the firm was hit by losses ahead of its planned public debut.
The digital trading firm reported 2.6 million new registered users between April and June, slowing from growth of 3 million new users in the first quarter of 2021.
The firm’s figures were still much higher than in 2020, as the combination of coronavirus-dampened spending and increased attention on new areas such as cryptocurrencies benefited the broker. Registered users joining the platform were up 121% compared to the same period last year, while net trading income rose 136% to $291m.
It posted a net loss of $89m for the quarter, primarily due to $71m in stock-based compensation for its staff and $36m in costs related to its upcoming merger with Fintech Acquistion Corp as part of a blank-cheque deal.
EToro’s chief financial officer Shalom Berkovitz said it was aware of the slowdown in new users joining the platform and overall trading activity, adding that the firm remains on track to hit its 2021 forecasts.
“We were conservative when we prepared our forecast and anticipated varied market conditions and retail investor behaviour,” Berkovitz said in a 25 August statement.
Much of eToro’s business model depends on converting users to fee-based products, as commission-free trading is one of its cornerstone offerings to draw in new customers, alongside the likes of Robinhood and Freetrade. Total commissions during the period rose to $363m, up 125% compared to the year before.
Cryptoassets largely drove the growth in commissions, eToro said, with the highest trading volumes reported in bitcoin, XRP, ether, cardano and dogecoin. As of the end of June, its total assets under administration were $9.4bn.
EToro is set to go public via its merger before the end of the third quarter this year, in a deal valuing the business at more than $10bn.
“We remain focused on growth rather than short term profitability and have therefore continued to reinvest income across our marketing channels and in the continued expansion of our product offering and global presence,” said Berkovitz, who also acts as eToro’s deputy CEO.
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