Freetrade returns to crowdfunding as investors reject higher valuation

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

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

Pre-registration for the round is now open to prospective backers on the same terms as Freetrade’s institutional investors secured earlier in 2022.

The funding will be used by Freetrade for further growth and product development, including doubling down on expanding to new markets. The UK commission-free stock has recently secured 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’ve seen a remarkable acceleration in our product development. Over the coming months, we’re focused on adding even more value to our subscription plans, building a product that shows that commissions in the UK are turning into a thing of the past.

Per a letter obtained by the Financial Times, Freetrade signed term sheets with new investors to inject fresh capital at a £700 million valuation. The deal was cancelled in January as investors turned wary of highly valued tech start-ups as stock markets plunged.

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

The news comes as Freetrade’s growth continues to surge. The UK fintech counts roughly 1.3 million customers, and has exceeded £5 billion in year-to-date trading volumes. On top of that, Freetrade, which generated revenues of £15.1 million in 2021, saw assets under administration (AUA) grow to £1.3 billion.

Freetrade’s app offers commission-free stock investment, and is targeted mainly at millennials. The company has rebuilt its platform infrastructure for investing to allow traders to place their instant orders without having to pay a commission fee. Before that, clients were allowed to invest in stocks and ETFs, but only if they accept to execute their trades at the end of business day, otherwise the broker charges £1 per trade.

Rather than partnering with an established broker, Freetrade holds a ‘full scope firm’ license from the FCA.