Thanks for joining me on a bank holiday Friday morning!
Iām currently on family holiday in Malta and will try and get through as may questions as possible now, but weāll also be having the open hours at our office on Tuesday evening and then Iāll be furiously answering questions again when the official Crowdcube campaign starts next Thursday at 12 noon.
One thing to note, this AMA is meant to answer any questions you have about the upcoming crowdfunding campaign logistics and such. I want to make clear it is not a public offering and much of the details of investment offering are only appropriate to be disclosed as part of the FCA-regulated crowdfunding. That means specific information that would only be released as part of the investment materials on our Crowdcube page will need to wait until Thursday, when it will be available to all Crowdcube members through their website.
Iād encourage everyone to sign up for Crowdcube in advance as an account would need to be created and there is a questionnaire etc that does take a bit of time.
This will almost certainly not be the last capital raise Freetrade does as we have very ambitious plans for growth in the future.
It may be the last raise we do as pure crowdfunding though as there is a limit set by the EU on how much a company can crowdfund without a prospectus. But of course we could issue a prospectus, similar to how Monzo and Crowdcube itself have done before, but we havenāt made any decisions on that yet.
Weāll release up-to-date user numbers and financial projections as part of the crowdfunding investment materials. Weāll also release the most recent audited financial statements (not yet filed at Companies House).
In terms of EU expansion, that is one of the main reasons for raising more capital. We currently have a regulatory passport to offer Freetrade to residents in the EU, but weāre not sure if we will be able to use that going forward to have to resort to Plan B due to the ongoing Brexit shambles. Regardless, we will be coming to the rest of Europe, I just canāt say the timing yet.
Any advantage of using a different crowdfunding platform to get new exposure in next raise?
Any plans to āgive creditā to members who help spread/share the word and get sign ons? Iām singing from the hymn sheet and love the appā¦but i see more and more of this in new apps driving sign on.
One area that I donāt see transparency on app is the spread on the buy and sell of the share (a hidden commission). Is there a point where this would be visible?
Thanks!
Loving the app. Happy to see lots of green on my portfolio
The hard limit on crowdfunding in this round is dictated by EU regulations on crowdfunding without a prospectus, being ā¬8m per 12 month period (c. Ā£7m). As we raised Ā£3m less than a year ago, that gives us Ā£4m of room for this round.
Weāll release the specific details on price per share etc with the opening of the Crowdcube page, but I can say the pre-money valuation will be roughly double last time.
EIS also has a limit per 12 month period, being Ā£5. So only Ā£2m could be potentially eligible and we would allocate this on a first-come-first-served basis via Crowdcube. We donāt have advance assurance from HMRC yet, but have applied, and have never had an issue with SEIS or EIS eligibility in our past rounds.
Finally, on growth, we have some exciting plans that Iāll leave Viktor to talk more about. But I will say that the most effective channels for us have been referrals and content and we plan to double down on both.
Your contents been good. Can see this as a helper. Main thing I hear with people is they donāt know where to start with investing in shares. Or not confident in choosing a company. So more general content on having a variety of investments in portfolio (not investing all eggs in basket) and not all in shares. Maybe som individual people examplesā¦Sarah earns x and invests in pension x and shares x etcā¦ so far so good!
I think our Product, Brand and Community are Freetradeās greatest differentiators vs potential competitors that may offer similar charging structures.
When you look at various markets around the world in the stockbroker or investments space I think it is clearly not a winner takes all market. There does tend to be a relatively small set of dominant players that compete on factors beyond just price.
When we vastly expand the universe of US stocks in the coming months that will include a lot of Asian companies (notably Chinese) that have ADRs listed in the States. But, yes, we do intent to offer Asian-listed securities but itās not on the short-term roadmap for now.
EU expansion is up first, but weād love to offer Freetrade beyond Europe in the future.
Weāre only offering B Investment shares in this round and these would be available to all existing shareholders equally regardless of previous investments.
Having a large number of A shares carry an extra administrative / corporate governance burden with respect to voting matters (weāre not keen to run Freetrade like a public company yet!). There are also restrictions placed on A shares by our Articles preventing transfers or sales, so B shares offer more flexibility for shareholders to do as they see fit without requiring rather onerous procedures for the company to facilitate.
It continues to increase every week as we build trust with our customers. Itās always nice to see the big spike around payday. I expect to see an increase once we add the ability to transfer in accounts from other providers.
Weāll release more details in the investment documents.
Weāll wait to share specific numbers with everyone upon opening the Crowdcube pitch, but as a teaser, we went over 20k iOS users soon after taking off the waitlist earlier this month. Android uptake has been strong too!
Weāre now a team of over 40 people at Freetrade HQ and hiring ā check out our careers page here.
Weāre aiming to have balance revenue not tied to one stream. Part of that we want to align our business incentives to the best interest of our customers, instead of having the incentive to push everyone into one type of product where we make money but would not be suitable to all customers.
That said, we anticipate that our top revenue stream in the future will come from monthly subscriptions for accounts other than the Basic starter account.
On HL and other stockbrokers talking about their āprice improvement serviceā and āmarket maker networkā, itās all a bunch of marketing spin. Almost every retail stockbroker in the UK connects to the same network of LSE retail market makers (aka RSPs) and so do we.
When we roll out our new core brokerage platform weāll expand the venues we connect to beyond the traditional LSE network to include pan-European exchanges like Cboe and other liquidity providers. That should benefit our customers in the form of more venues to find the best execution for their orders.
On LSE exchange fees, that is only applicable for orders executed on the LSE order book. Trades placed through the RSP network are not subject to exchange fees.
