UK fintech Freetrade seeks to double valuation in fundraising

UK fintech Freetrade will seek a £650m valuation in a fresh round of crowdfunding, double the value the company posted earlier this year, as the trading app plans to push into cryptocurrencies.

The group on Wednesday launched its seventh round of fundraising from the public since its founding in 2016. The London-based start-up has also raised money from traditional venture capital investors, most recently in March, which valued it at £270m. 

The sharp rise in Freetrade’s valuation comes as retail stock trading boomed during the Covid-19 pandemic, bringing a rush of younger customers and new cash to brokers from Robinhood in the US to established players such as the UK’s Hargreaves Lansdown.

In the UK, customers opened 7.1m investing accounts in the first 12 months of the pandemic, according to the most recent figures from the Financial Conduct Authority.

Freetrade, which recently surpassed £1bn in assets, is seeking to capitalise on this momentum to expand across Europe, squaring off against continental rivals such as Trade Republic.

Adam Dodds, Freetrade’s chief executive, told the Financial Times in September that next year would see “battleground Europe” among investment apps.

“What we’ve seen over the past two years is that the theory that Europeans don’t invest and aren’t interested in the stock market isn’t true,” he said.

Freetrade — which has 600,000 funded accounts, up from 150,000 at the start of the year — expected to bring in £15m of revenue this year, up from £3m last year. However, it still projected a loss of £26m before interest, taxes, depreciation, and amortisation as it continued to invest in tech and marketing.

The company, which charges investors foreign exchange fees on their trading and offers a monthly premium subscription, said its new valuation target represented a multiple of 13 times projected 2022 revenues, not including new business lines such as cryptocurrency trading. It plans to launch this in the new year, matching moves by peers including Revolut, Germany’s Scalable Capital and Robinhood in the US.

The French payment mobile app Lydia this week said it would allow its 5m users to trade cryptocurrencies, along with stocks, ETFs and precious metals. “Driven by the pandemic, trading has seen unprecedented appetite from retail investors,” the company said.

Video: Cryptocurrencies: how regulators lost control

The push into crypto for Freetrade runs counter to a campaign by UK regulators to discourage high risk investing among retail punters. The FCA said it wants to see fewer first-time investors jumping into digital tokens, and has raised concerns that slick trading apps “[make] it easier for consumers to make bad decisions” — pointing to the sharp rise in sign-ups during January’s craze for US “memestocks”. 

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Freetrade counts 13,000 individual shareholders as its largest block of owners, alongside venture capitalists including Left Lane Capital and Molten Ventures, previously known as Draper Esprit.

It said it would for the first time open its crowdfunding to European investors, as it looks to raise up to £13m. The company hopes to roll out services across Europe next year, pending regulatory approval from Swedish authorities.