👉 Background: eToro is an Israeli trading and investment platform that was founded in 2007 and has grown to over 38 million registered users around the world — largely off the back of its HEAVY marketing. It ran a heap of ads with Alec Baldwin, as well as sponsorships with 5 English Premier League clubs, 5 Bundesliga clubs in Germany… and even Rugby Australia. But it’s best known for letting users trade and follow others in assets like stocks and crypto.

👉 What happened: On Wednesday, eToro listed on the Nasdaq and its shares absolutely popped. Its shares were priced at $52 but jumped to over $74 at one point, which was a 42% intra-day gain.  

👉 What else: The main reason? Its IPO was oversubscribed by more than 20x a bit like throwing a party for 50 people and having 1,000 show up. eToro’s debut was a very good sign for the potential of other companies looking to IPO in the near future.

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What's the key learning?

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💡A key signal of IPO success is oversubscription - that’s when demand for shares exceeds the number of shares offered. In eToro’s case, the demand was so high that they increased the number of shares offered from 10 million to nearly 12 million shares, and even then, the demand was reportedly 20 times higher.

💡The good thing for eToro is that oversubscription can create hype and as a result, it can drive the share price well above the IPO price on day one.  

💡But, a hot debut doesn’t always mean long-term outperformance. In 2021, it was the year of peak lockdowns, peak meme-stocks, peak money printing. In that year, a record 397 companies went public on the Nasdaq. But most of the “Class of 2021” has performed badly in the after market and, currently, only 17% of these public companies are now trading above their IPO offer prices.