Commission-free stockbroker Freetrade has announced it is to raise further funds and will return to Crowdcube to do so, from 14/05/2020. Established in 2015 Freetrade launched its commission-free share dealing services in 2018 and now claims to have some 150,000 clients.
This year the company has expanded beyond the UK to target investors and share traders in Ireland and the Netherlands.
How does Freetrade compare to other stockbrokers?
Freetrade (read our Freetrade review) are amongst a raft of other brokers entering the free stockbroking space including IBKR Lite, Dabbl & Robinhood, whereas established brokers like Hargreaves Lansdown are sticking to their guns charging per trade (although they do have a considerably superior offering). Interactive Investor meanwhile has moved to a flat per-month fee for investing.
Freetrade famously allow investors commission free investing with no minimum deposit requirements through stocks and shares ISA’s and ETF investing.
What does this Crowdcube round value Freetrade at?
According to the info on the Crowdcube equity crowdfunding pitch page, this round value Freetrade at £140,000,000.
There has been some discussion on the Crowdcube bulletin board about how realistic the valuation being with one user asking why it’s main competitor in the free stockbrokers space has been left off it’s valuation. This could perhaps be to the spat Freetrade CEO Adam Dodds and Trading212 CEO Nick Saunders had on Linkedin.
There have also been questions about how high the valuation could be based on the fact that Freetrade only generated £86k in revenue for 2019, versus operating expenses of £3.9m. One user, for example, highlighted that Jarvis Stockbrokers is already listed on the LSE, pays a 5% dividend, made a net profit of just under £4m and have £5m in the bank.
For a company that basically gives things away for free, on the hope that their customers will pay for it later, you must use your common sense to see if that valuation is any good, especially as you can only invest in 600 stocks and ETFs, other stockbrokers for example offer access to at least 6,000!
Why is Freetrade returning to equity crowdfunding on Crowdcube?
Freetrade hopes to expand its operations across other EU and EEA countries where it believes a market of up to 100 million millennial investors can be found
In 2019 Freetrade closed out a US$15.0 million series A funding round with one of Europe’s largest tech investors Draper Esprit. Who in recent years have also backed fintech businesses such as Revolut, TransferWise and ironically enough Crowdcube, amongst others.
Freetrade is no stranger to crowdfunding via Crowdcube (read Crowdcube user reviews) indeed it once raised a £1.0 million in a record-breaking 77 seconds on the site. Freetrade raised a further £5.0 million via crowdfunding rounds and is now looking to tap social investors once more.
How much is Freetrade raising on Crowdcube this time?
The firm is looking to raise a minimum of £1.0 million but will take up £6.90 million via Crowdcube, should that much be available
The funding round will take place on the 14th of May and will initially only be open to the existing investor in Freetrade between 9.00 and 11.00 am, after which customers of the firm will have their chance to pledge money to the fundraising before the general public can get involved from 1.00 pm onwards.
Details of the equity offering will be released via Crowdcube on the day, but the shares will be EIS eligible. See this link for more information
Why is Freetrade raising funds on Crowdcube again?
Freetrade’s management says that the funds will be used for product development and to take advantage of what they call the explosive growth of interest in share trading, that the coronavirus seems to have bought about. Freetrade’s account application rates rose by +125% in March alone, for example.
Viktor Nebehaj, Freetrade’s chief marketing officer, and a co-founder of the business said that:
“We’ve seen record signups and trading volumes on our platform over the past couple of months. So we feel very confident going into our next crowdfunding round – something that we had planned on doing for a long time,”
How does Freetrade compare to other zero commission stockbrokers raising money?
US rival Robinhood, which has opened a UK office, recently raised US$280.0 million giving it a valuation of US$8.30 billion
A figure that perhaps shows us the potential that Freetrade has if they can capitalise on current levels of interest. Freetrade has already attracted 8,000 investors via crowdfunding and no doubt it will be hoping to add to that tally on Thursday.
Is there a future for commission-free stockbroking?
We have our reservations about commission-free share trading because whichever way you slice it, someone somewhere is bearing the costs of that trading. That said the idea certainly seems to have resonated with investors and retail traders alike, and we will watch Thursday’s events with great interest.
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Richard founded the Good Money Guide (previously Good Broker Guide) in 2015 and has been a broker for 20 years most recently at Investors Intelligence and previously a multi-asset derivatives broker at MF Global (Man Financial). Richard started his career working as a private client stockbroker at Walker Crips and Phillip Securities (now King and Shaxson) after interning on the NYMEX oil trading floor in New York and London IPE in 2001 & 2000.