Freetrade books £40M loss as valuation crashes
Freetrade, which calls itself a challenger stockbroker, has released its financial results for the fiscal year ending September 30, 2022.
Per a Companies House filing, the company reported revenue exceeding £15.6 million, up 23.8% compared to £12.47 million in 2021. However, Freetrade’s net loss for the period increased to £39.7 million, compared to the loss of £17.1 million in the previous year.
The filing highlighted that the group’s increased loss for the financial year was primarily attributed to elevated costs. Sales costs rose from £1.6 million to £2.2 million, while “other operating expenses” surged from £29.27 million to £55.7 million.
The sluggish results come shortly after the loss-making investing app slashed its pre-money valuation by 65 percent as part of a crowdfunding campaign. The move was another sign of the crisis that is gripping start-ups due to a wider sell-off in the financial technology sector and a market slowdown.
The latest financing valued Freetrade at £225 million, significantly lower than its previous valuation of £650 million recorded in November 2021.
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.
This markdown aligns with a broader trend of decreasing valuations in the tech industry as interest rates rise and investor sentiment shifts. Notably, Robinhood has seen its stock price plummet by 70% since its public listing in July 2021. Similarly, Schroders, an investment firm, marked down the value of its investment in Revolut, another fintech company offering trading accounts, by 50% in April.
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.