Freetrade, a start-up specializing in stock trading, has experienced a significant decrease in its valuation by 65%. This drop comes as the financial technology industry faces a sell-off and the markets slow down.
The investing app, which is currently operating at a loss, is preparing for a crowdfunding campaign with a valuation of £225 million. This figure is nearly two thirds lower than its previous valuation of £650 million in November 2021.
This markdown is a response to the declining value of competitors and a general revaluation of tech companies worldwide due to rising interest rates. Robinhood, for example, saw a 70% plunge in its stock price since going public in July 2021, despite being valued at $8.5 billion (£6.7 billion). Schroders also marked down the value of its investment in Revolut, a trading account provider, by 50% in April.
Consumer trading and finance apps experienced a surge in popularity during the lockdown as individuals sought entertainment and investment opportunities while confined to their homes. However, the situation has now reversed due to rising interest rates and the lifting of restrictions.
CMC Markets, a rival trading platform, reported “weaker” investment revenues due to “subdued market conditions”.
Freetrade, which is supported by Molten Ventures and Left Lane, plans to launch a crowdfunding round later this month to raise additional funds. The company offers commission-free buying and selling of thousands of stocks, with over £110 million raised previously. Freetrade boasts approximately 700,000 customers and manages £1.4 billion in assets.
In the first quarter of this year, Freetrade reported a loss of £3.3 million on revenues of £4.7 million. To reduce costs, the company implemented a round of redundancies last summer.
Adam Dodds, CEO of Freetrade, acknowledged the changing market environment and the need for the company to prioritize profitability. He stated, “We’ve seen the longest bull market in history come to an end and valuations of public companies fall. Freetrade is no different. We’re now operating in a different market environment where we need to prioritize profitability. We’ve arrived at a valuation for this round in line with the declines in valuation we’ve seen with public market peers.”
Last year, reports surfaced of Freetrade exploring a possible sale and considering hiring advisors to evaluate its options. However, discussions with JP Morgan in December were unlikely to progress, according to Sky News.
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