eToro's $231M Acquisition of TradeZero Leads to 10% Stock Decline

eToro Acquires TradeZero for $231 Million

eToro has announced its acquisition of TradeZero, a U.S.-based brokerage catering to active traders, in a deal that could amount to $231 million. This strategic move aims to strengthen eToro's broker-dealer capabilities and provide access to the Canadian market, with the deal expected to close in the first half of 2027.

TradeZero, founded in 2015, offers commission-free trading for U.S. stocks and options. eToro is particularly interested in TradeZero’s technological infrastructure and engaged trading community as it seeks to expand its footprint in the competitive U.S. equity market. Co-Founder and CEO Yoni Assia emphasized that this acquisition will accelerate innovation and enhance eToro's service offerings for American clients, aiming to create a comprehensive financial superapp for a new generation.

This acquisition positions eToro to better compete with major firms such as Robinhood, as TradeZero’s established broker-dealer framework and community directly align with eToro’s growth objectives. The total deal includes cash payments and the potential issuance of up to 2.5 million new Class A shares, pending standard adjustments. TradeZero reported approximately $80 million in revenue over the past year, boasting a gross margin of 81%.

Market Response to Acquisition

Despite the potential benefits of the acquisition, eToro’s stock experienced a significant downturn, plummeting over 10% to $30.11 after the announcement, bringing its market capitalization to around $3.33 billion. This decline occurred even after eToro exceeded earnings expectations for the second quarter, reporting an earnings per share (EPS) of $0.68 versus the $0.61 estimate.

Investor concerns may stem from a challenging cryptocurrency market impacting eToro’s revenue, which has seen a drop of about 30% in crypto-related earnings, even as equity trading continues to grow. eToro also aims to boost its presence in U.S. equities, an area where it faces tough competition from Robinhood. The company holds 4.28 million funded accounts, reflecting an 18% increase year-over-year, with a net contribution of $229 million recorded in the last quarter. eToro anticipates wrapping up the TradeZero deal subject to regulatory approval in 2027.