Free trade returns to crowdfunding as investors reject higher valuation

Freetrade, which calls itself a challenger stockbroker, is set to launch its eighth round of crowdfunding after apparently failing to raise new investment at a higher valuation.

The UK commission-free equity trading platform has scheduled September 14 for its latest funding round, which will give more than 17,000 existing investors the opportunity to invest in a convertible loan.

Pre-registration for the round is now open to potential backers on the same terms as Freetrade institutional investors obtained earlier in 2022.

The funding will be used by Freetrade for further growth and product development, including doubling down on expansion into new markets. The UK commission-free stock recently obtained a license from the Swedish financial regulator, a big step forward in its European expansion.

Adam Dodds, CEO and Founder of Freetrade, said: “Since the start of the year, we have seen a remarkable acceleration in the development of our products. Over the next few months we are working to add even more value to our subscription plans, creating a product that shows UK commissions are a thing of the past.

According to a letter obtained by the Financial Times, Freetrade has signed term sheets with new investors to inject fresh capital at a valuation of £700m. The deal was called off in January as investors grew wary of popular tech start-ups as stock markets plunged.

Instead, Freetrade raised £30m in debt funding led by a group of existing investors. The growth funding round was funded by Molten Ventures, Left Lane Capital and L Catterton. They were joined by new investors, including Phoenix, an investment manager with more than $100 billion in assets, and Capricorn Capital Group, a private investment firm.

The news comes as Freetrade’s growth continues to surge. The British fintech has around 1.3 million customers and has surpassed £5 billion in transaction volumes year-to-date. On top of that, Freetrade, which generated revenues of £15.1m in 2021, saw its assets under administration (AUA) reach £1.3bn.

Freetrade’s app offers commission-free stock investing and is aimed primarily at millennials. The company has rebuilt its investment platform infrastructure to allow traders to place their instant orders without having to pay any commission. Prior to this, clients were allowed to invest in stocks and ETFs, but only if they agreed to execute their trades at the end of the business day, otherwise the broker charged £1 per trade.

Rather than partnering with an established broker, Freetrade holds a “full business” license from the FCA.

Robert D. Coleman