Freetrade, the UK-based zero-commission stock trading app and a rival to Robinhood, has been acquired by IG Group for £160 million ($195 million).
The deal values Freetrade at a 29% discount to its 2023 valuation of £225 million and reflects ongoing challenges for fintech firms facing economic uncertainty.
Despite the drop in valuation, Freetrade will retain its brand identity and operate as a commercially standalone entity, according to company statements.
It currently has 720,000 customers and managing assets worth €2.9 billion.
Rise and fall: Freetrade’s journey
Founded in 2016, Freetrade quickly gained popularity among younger and novice investors, offering an easy-to-use platform for commission-free equity trading.
The app expanded its offerings over time to include exchange-traded funds (ETFs), savings products, and government bonds.
Freetrade’s growth was amplified during the pandemic, as retail trading surged amid a wave of speculative interest fueled by social media platforms like Reddit.
The company saw significant user engagement during the GameStop short squeeze of early 2021, where retail traders caused the stock price to soar against short sellers.
However, Freetrade’s momentum slowed in the aftermath of the pandemic.
Macroeconomic pressures, including rising interest rates and subdued retail trading activity, forced the company to make significant adjustments.
In 2023, its valuation dropped 65% from a 2021 peak of £650 million.
That year, Freetrade also reduced its workforce by 15% and closed its operations in Sweden to focus solely on the UK market.
Consolidation in the wealth-technology industry
The acquisition comes at a time of consolidation in the wealth technology industry, as firms seek scale to remain competitive.
The £160 million deal underscores the increasing pressures on smaller fintech firms to partner with larger players to sustain growth.
Freetrade’s CEO and co-founder, Viktor Nebehaj, described the acquisition as a “transformative deal that recognizes the significant value that Freetrade has created.”
“We’re grateful for the support of our crowdfunding investors throughout our journey as a standalone business. Together with IG Group’s significant resources and backing, this is an exciting opportunity to accelerate our growth and delivery of new products and features,” he said.
The transaction follows similar moves in the industry, such as the £5.4 billion acquisition of Hargreaves Lansdown by a consortium led by private equity firm CVC Group.
Analysts believe that more consolidation could follow as fintech firms adapt to changing market dynamics.
What it means for Freetrade’s crowdfunding investors
The deal holds particular significance for Freetrade’s crowdfunding investors, who contributed nearly €35 million via Crowdcube to support the company’s growth.
According to fintech analyst Seb Johnson, Freetrade A Ordinary share and B Investment shareholders will receive £1.19 per share; Series B1 shareholders will receive £2.08 per share; and Series B3 shareholders will receive £2.60 per share.
Freetrade, which achieved a peak valuation of €771 million during the pandemic-driven retail trading boom in 2021, experienced a steep drop to €266 million in its 2023 crowdfunding round.
Despite this decline, the company reached a significant milestone in 2024, reporting its first half-year adjusted operating profit of €107,000, marking a positive turn in its financial performance.
Freetrade ended 2024 with strong financial results, including a 52% growth in assets under administration (AUA) to £2.5 billion and a 32% increase in revenue.
With IG Group’s backing, the company plans to accelerate its growth trajectory and launch new products.
The acquisition remains subject to regulatory approval and is expected to close later this year.
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