The spike in retail investing has been a boon for online brokerage platform eToro. The Israeli-headquartered company will go public via a SPAC (special purpose acquisition company) backed by businessperson Betsy Cohen in a $10.4 billion deal. Shares of FinTech Acquisition Corp V (FTCV) shot up more than 30% on Tuesday following the announcement.
"We are seeing a conﬂuence of circumstances — the acceleration of digital technologies, commission-free stock investing, and low interest rates — increasing retail engagement in the capital markets," eToro's CEO Yoni Assia told Yahoo Finance via email.
"eToro welcomes and celebrates the rise of the retail investor," he added.
The platform boasts over 20 million registered users from more than 100 countries. Five million of those were added last year alone as retail engagement rose worldwide.
The company's biggest differentiator is its social component. "We are the only social investment network," offering users "the ability to copy successful investors and be copied yourself," said Assia. For example, users can mimic trades made by "popular investors" who have proven success with their positions.
eToro already offers crypto services in the U.S. and plans to launch stock investing in the second half of 2021.
The company's business model differs from the payment-for-order flow model used by RobinHood and other online trading apps.
In a webcast call on Tuesday, Assia highlighted 87% of total revenues in 2020 were generated by trading revenues representing the difference between the buy and sell prices of assets.
'Some stocks are incredibly high risk at the moment'
"Is it without dangers or risks? No," he tells Yahoo Finance.
"Some stocks are incredibly high risk at the moment, and we're urging our users to be cautious and to not simply invest in a stock just because it is going up" he continued.
"We work to educate our users to be cautious and remember the basics of investing: diversify and only invest in markets and instruments with which you are familiar," added Assia.
Ines covers the U.S. stock market. Follow her on Twitter at @ines_ferre