Freetrade’s mission is to get everyone investing. A FCA-regulated stockbroker, and member of the London Stock Exchange, its app won Best Online Trading Platform at the British Bank Awards every year from 2019 to 2021. After six previous rounds with 13,000 investors, it's back again.
- 1.1m users, over 600% since May 2020’s crowdfunding
- £1bn in client assets
- £50m oversubscribed Series B in 2020 with world-class growth investors
- Rolling out EU stocks in anticipation for launch across Europe
Operations
Freetrade is an award-winning, commission-free investing app. Our mission is to get everyone investing.
Investing is one of the best ways to grow your money over the long-term, but high commissions and clunky products have made it complicated for people to start and grow their investments. We have a simple, freemium pricing model, and have built the tech behind our award-winning app from the ground up.
The 18 months since our last crowdfunding has seen Freetrade become a mainstream provider of general investment accounts, stocks and shares ISAs, and self-invested personal pensions, with over 1.1m users and £1bn in client assets.
Earlier this year, we raised £50m in an oversubscribed Series B with world-class growth investors including Left Lane Capital, L Catterton, and Molten Ventures.
Our proprietary brokerage system, the Freetrade Cloud Platform (FCP), has supported this surge in customers while keeping costs low. It’s the foundation we've used to roll out new products and features like live pricing, instant bank transfers, and pensions. In the next few weeks, we will start rolling out access to European stocks. As a part of this, we connected FCP to the European market infrastructure, which will enable us to launch in Sweden and the rest of the EU.
We are raising with the aim of supercharging our growth, allowing us to grow engineering & marketing internationally.
Team
Our founder-led, multi-disciplinary management team brings together all-star talent from tech titans, financial service giants, and top-tier consulting firms.
Adam Dodds, Founder & CEO
The instigator of this whole Freetrade thing. ACA and CFA qualified. Ex-KPMG, experience auditing global banks and brokerages; advising on financial services, fintech M&A.
Viktor Nebehaj, CMO & Co-founder
Drives our customer growth across the whole marketing stack. Used to scale Google's core search business in Europe. Successfully grew startups across EU & Asia.
Paul Brooking, CFO
Previously Deputy CFO at Revolut, ex Paysafe, almost 20 years at IG and PwC.
Dan Tedman, VP Risk & Compliance
Joined the regulator in 2010. 5+ years working at the FSA and Bank of England then moved to Alvarez and Marsal as a regulatory consultant.
Duncan Leslie, VP Product
A brokerage industry veteran, Duncan spent 15 years at Hargreaves Lansdown prior to Monzo as Product Director.
Amy Gilman, Associate Director of People
Previous award-winning Director of L&D at La Fosse Associates. Amy is in charge of all things people & culture.
Alan Wright, Director of Engineering, UK
A hugely experienced engineering leader, Alan joined Freetrade this year, bringing experience from Spotify and Monzo.
Timothy Drew, Director of Engineering, Australia
Tim is the original architect of Freetrade's FCP. Now in Aus at our Brisbane engineering office.
Financials
One key thing to note is that Freetrade have been given a way free shares. Essentially, Freetrade paid people to use its offering, with the aim of using the offering regularly.
| Year | 1 | 2 | 3 | 4 | 5 | 6 |
|---|---|---|---|---|---|---|
| Year end date | 30/09/2016 | 30/09/2017 | 30/09/2018 | 30/09/2019 | 30/09/2020 | 30/09/2021 |
| Revenue (£'000) | 0 | 0 | 0 | 86 | 1,660 | 12,682 |
| Loss before tax (£'000) | N/A | (504) | (1,165) | (3,470) | (9,517) | (18,247) |
Risks
As with any investment, investing in Freetrade carries a level of risk. Overall, based on the key risks highlighted below, the degree of risk associated with an investment in Freetrade is higher than in a company that's trading on a public market (such as Hargreaves Lansdown).
Early-stage investment
Freetrade is at one of the earliest stages of the business lifecycle, and the failure rate of companies at that stage is usually much higher than those at a later stage. As of 2022, 57% of companies that are incorporated in the United Kingdom fail within the first five years of the companies incorporation, according to the Office for National Statistics.[1]
Illiquid investment
The number of transactions in shares of private companies is usually significantly lower than in public companies, typically resulting in it taking longer to sell shares in private companies at a price that is at least equal to the price that the shares were bought at. Accordingly, the Freetrade investment opportunity is considered to be higher risk than more liquid companies.
Valuation
Research suggests that in terms of estimating the expected return of an investment over a period of 12-months or more, the approach that is more accurate is the discounted cash flow approach.; nevertheless, for completeness purposes, separately, the valuation of the company is also estimated using the using the relative valuation approach (the valuation based on the relative approach can be found in the appendix of this report).
Freetrade has never paid a dividend and is not expected to do so for the foreseeable future. Accordingly, the Stockhub users suggest using the free cash flow valuation method, rather than the dividend discount model or any other method.
Appendix
Relative valuation approach
As noted earlier in this report, research suggests that in terms of estimating the expected return of an investment over a period of 12-months or more, the approach that is more accurate is the discounted cash flow approach, so that's the approach that Stockhub suggests using to determine the estimated value of the company (the valuation based on the discounted cash flow approach can be found in the valuation section of this report); nevertheless, for completeness purposes, separately, the valuation of the company is also estimated using the relative valuation approach.
What's the expected return of an investment in Freetrade using the relative valuation approach?
Accordingly, Stockhub estimates that the expected return of an investment in Freetrade Inc over the next five years is 4.4x. In other words, an £1,000 investment in the company is expected to return £4,400 in five years time. The assumptions used to estimate the return figure can be found in the table below.
Assuming that a suitable return level over five years is 10% per year and Freetrade achieves its expected return level (of 4.4x), then an investment in the company is considered to be a 'suitable' one.
What are the assumptions used to estimate the return figure?
| Description | Value | Commentary |
|---|---|---|
| Which type of multiple do you want to use? | Growth-adjusted EV/sales | For the numerator, the Stockhub users believe that to account for the different financial leverage levels of its peers, it's best to use enterprise value (EV), rather than price. For the denominator, the Stockhub users believe that because it expects Freetrade to reinvest almost all of its revenue back into the business over the five year forecast period and therefore its earnings are expected to be abnormally low over the period, it's best to use sales. Accordingly, the Stockhub users suggest valuing its company using the EV/sales ratio. However, the Stockhub users think that to take into account the different business lifecycle stages of its peers, the most suitable valuation multiple to use is the growth-adjusted EV/sales multiple, rather than the EV/sales multiple. |
| In regards to the growth-adjusted EV/sales multiple, for the sales figure, which year to you want to use? | Year 1 | Stockhub suggests that with sales forecast to grow exponential over the five year forecast period, it's best to use forward-looking data, rather than historic data.
In regards to the growth-adjusted EV/sales multiple, for the sales figure, Stockhub suggests that in order to account for the forecasted exponential growth of the business, it's best to use one at the end of the forecast period (i.e. Year 5). |
| In regards to the growth-adjusted EV/sales multiple, for the sales growth figure, which year(s) do you want to use? | Year 2 to 4, from now | Stockhub suggests that for the sales growth figure, it's best to use Year 2 to 4. |
| In regards to the growth-adjusted EV/sales multiple, what multiple figure do you want to use? | 89x | In Stockhub's view, Freetrade closest peer is Nutmeg. Nutmeg was acquired by JP Morgan in June 2022 for £700 million. |
| Which financial forecasts to use? | Stockhub | The only available forecasts are the ones that are supplied by the Stockhub company (the forecasts can be found in the financials section of this report), so Stockhub suggests using those. |
| What's the current value of the Stockhub company? | £500 million | As at 21st May 2022, the current value of its company at £500 million. |
| Which time period do you want to use to estimate the expected return? | Between now and five years time | Stockhub suggests that to account for general market cyclicity, it's best to estimate the expected return of the company between now and five years time. |
Freetrade peer(s)editedit source
| Investments | Industry | Enterprise value/sales | 1-year forward revenue growth rates (%) | Growth-adjusted enterprise value/sales ratio |
|---|---|---|---|---|
| Apple, Inc | Internet content & communication | 7.27x | 8.20% | 89x |
Actions
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