Hi All,
For those wanting to see the financials announced at the Community Crowdfunding meetup yesterday, take a look at the summary here. Shows estimated revenue growth, breakeven projections and valuations.
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A lot of positives from Freetrade update. In 1H 2023 the revenues are 50% up vs 1H 2022 despite a reduction in marketing spending.
The only red flag is that with a £225m valuation, the the expected return for the investors in this round seems low:
- assuming Freetrade base case the company will achieve £50m revenues and £12m EBITDA in 2025;
- assuming 2025 as exit year, the company will be valued at a multiple of EBITDA. Assuming 20x EBITDA, Freetrade will be valued at around £250m in a couple of years time (base case);
- so the current valuation seems “high” to allow a new investor to make a decent return.
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Any investors on board up to the Series A (£0.95) will eventually come out with something I would imagine ( to varying degrees obviously).
Investments after that? Not so sure …
Can’t see any chance of an exit in 2025, maybe 2027 at the earliest.
Increase in revenues reported are nice but Freetrade aren’t going to be able to make 6 million a year in interest forever.
probably the “core business” trading activity will pick up again and it will make for the decline of interest revenues. Cleary a revenues diversification is very important
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no comfort for the investors who paid £9.25 a share at a inappropriate valuation/forecasts and who have lost £6.65 a share and now have to suck that up, even the VC’s are under water now, but as usual it’s the small private investors being used as the annual cash cows.
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P.s… if you want a dose of financial reality, check out yesterday’s CMC markets results and comments.
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this CMC Markets?
Front page:
74% of retail investor accounts lose money when spread betting and/or trading CFDs with this provider .
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The most heartening part of the presentation for me was that they have reduced the monthly burn rate to £600k. That’s 60,000 plus subscriptions or cash interest / security lending income on ~2B AuA or FX fees from 50k higher value users etc. it seems super achievable to close that gap to profitability in the near future.
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Our Invest UK platform, which launched to the general public in September 2022, has delivered a number of milestones this year, with the current offering now including equities, ETFs, ESG screening and flexible ISAs. Expansion into mutual funds and SIPPs will shortly follow. We see significant potential in the UK market, including
great B2B opportunities, and while B2C client numbers are currently low given the recent launch, we expect these to grow significantly over the coming years
CMC Invest (which is what should be compared) looks like it’s not currently generating significant revenue. I only skimmed the document but it doesn’t seem to make any note of profit or even generation (yet) from their UK invest product.
CMC Invest though in my mind has the potential to be a more direct competitor to Freetrade than the likes of HL or ii etc. I think Adam mentioned them but slightly dismissed them a little in the presentation and questions. But they’re very similar to Freetrade, similar offering, similar goals, similar pricing infrastructure.
You can’t compare the CMC CFD business to Freetrade though.
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And at least half of the 600k gap has already been closed but will be realised over next couple of months.
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The valuation was appropiate at the time but now the environment has changed - that’s just the reality of investing.
If you still believe in the vision, it’s an opportunity to average down.
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Will there be exit opportunity in this round? I missed last time 
not comparing CMC markets with Freetrade, CMC markets are a PLC who posts profits and pays dividends, it was the outlook for business in general that raises concerns which may possibly hinder Freetrade going forward.
As for the £9.25 share price, you have to make decisions, like we all did, that we were happy to pay that price for the growth potential, sadly for now that has not occurred for the time being.
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No. It’s just a crowdfunding round.
I treat investing in FT as a way to support the business.
Yes being able realise something at an exit would be nice eventually but it isn’t the reason that I invested. Remember, this is a privately funded startup, there are no guarantees.
We trade in publicly traded stocks on FT to be able to do this ourselves.
And by investing in the future of the FT business we can continue to use their great platform!
I would much prefer that to any alternative.
So from my perspective and based on the information they have provided I am happy to continue to support them through this crowdfunding round.
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It was the right valuation at the time, People were willing to pay it, so it wasn’t too high. Why give away more equity when you don’t need to?
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Thanks for posting this @RyanGaudion
It is very informative.
Especially about the average portfolio value.
I guess I am at the ‘higher’ end with a 500k+ combined valuation. This has been built up through diligent investing over 20 years with my previous platforms and I was very happy to be able to move this all into FT.
I was willing to cash in my previous investments which were mostly mutual funds that I diversified into a small set of ETFs,
so I can understand why it is so hard to attract the many existing large pensions into FT
I want this platform to succeed in the long term.
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If nothing else a Freetrade have shook up the old dinosaurs HL etc to offer better and cheaper services.
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Same - investing in Freetrade is nothing like me investing in the stockmarket - there was hope but not expectation that I was going to make money from the investment. I believe in the business and want it to be successful.
However, I shan’t be investing this time round as I have invested in 3 previous rounds - good luck to all.
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