(Bloomberg) — TradeZero Holding Corp., a platform that provides free and subscription-based software for active stock trading, has agreed to merge with Dune Acquisition Corp., a blank-check firm.
The deal, which confirms an earlier Bloomberg News report, is set to give the combined company an enterprise value of $556 million. Brooklyn-based TradeZero plans to spend merger proceeds on boosting its offerings, TradeZero co-founder and Chief Executive Officer Dan Pipitone said in an interview.
“This transaction will give us the opportunity to execute growth plans including rolling out crypto trading, multi-leg options trading and to expand into other geographies,” said Pipitone. The company hopes to launch in Canada by year-end, and in Europe and the Middle East in 2022.
The transaction is priced to appeal to both retail and institutional investors, said Dune’s 28 year-old CEO Carter Glatt. The combined entity’s forecast of a 2022 price-to-earnings ratio of 14.9 represents a discount to rivals including Interactive Brokers Group Inc. and Charles Schwab Corp. Its projected 2022 enterprise value to revenue multiple of 4.9 is a fraction of fintech rivals including Robinhood Markets Inc.
“We believe our market value will grow over time, and starting at a discount to our peers really gives us some runway,” Pipitone said. He and co-founders John Muscatella, Giovanni Ferrara, John Caruso and Kosta Corriveau are rolling 100% of their equity and will own 70% of the combined company, assuming no Dune investors exercise redemption rights.
Pipitone said much of TradeZero’s customer base, which averages 34 years of age, trade actively and for a living. Roughly three-quarters of its users are outside the U.S., and the company had 18,000 active accounts with average equity balances of $8,000 as of June 30.
The company, which owns broker-dealers in the U.S. and Bahamas, derives less than 10% of its revenue from payment for order flow, Glatt said.
Read more: Robinhood Sees Crypto, Order Flow Payment Risks in Filing Update
The special purpose acquisition company merger is expected to close during the first quarter of next year and to result in TradeZero trading on the New York Stock Exchange under the ticker “TRAD”.
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