Freetrade considers selling as buzzy ‘fintech’ stocks crumble

Stock trading app Freetrade is preparing to tap advisers for a possible sale as financial technology start-ups come under pressure.

Freetrade, which was last year valued at £650m by private investors in a crowdfunding campaign, plans to hire Bank of America to assess its options.

City sources said Freetrade was considering a sale or a merger with rival financial technology companies. It can also pressure the market to raise more investment from venture capital funds.

Founded in London by CEO Adam Dodds in 2016, Freetrade allows clients to buy UK, US and European stocks and funds without trading fees. It has raised more than £110m in venture capital funding and grew rapidly during the pandemic as thousands of people began trading the stock market while stuck at home.

It has raised tens of millions of pounds from ordinary investors through online crowdfunding rounds. But last year it failed to secure further venture capital investment worth £700m. It came as the retail boom began to cool, hitting investment platforms across the City of London.

Freetrade, which has over £1.4bn of assets under management, raised £30m in May through convertible loans issued to early stage investors including London-listed Molten Ventures and investment manager Phoenix. It raised a further £2m from crowdfunding investors in September.

CEO Adam Dodds told investors in September: “In parallel with the previous crowdfunding round, I also had conversations with potential new institutional investors.

“Things got advanced enough that I signed a term sheet in December to raise funds worth £700m before the money.

“In the advanced stages of this deal, the macro environment began to turn sharply, and venture markets took hold – the deal did not go through.”

The company has since cut by around 15 per cent, which Dodds said meant the company would reduce its cash spend to around £1m per month “significantly down from the start of the year”.

Since then, valuations at tech companies have crashed as investors become fearful. Swedish buy-now-pay-later company Klarna’s value fell 85 percent in a funding round this year, falling from $46 billion to $6.7 billion. Robinhood, a US stock trading company and rival to Freetrade, has endured a 70pc share price drop, valuing it at just over $8bn.

In its latest shareholder update, Freetrade said it had revenues of £15.6m in the 12 months to August and customer numbers were up 65 per cent to 680,000. Freetrade earns from currency conversions, customer subscriptions and interest on cash deposits.

According to its latest accounts, Freetrade had revenues of £12.7m in the year to September 2021 and made a loss of £18.2m.

Freetrade and Bank of America declined to comment.