In June, the firm raised 150 million euros ($174 million) at a 1.2 billion euro valuation. The broker currently has 200,000 customers who have invested 2.5 billion euros, according to the executive.
If thatās the market price of the neighbourās house, Freetrade would be valued roughly @ Ā£10,000,000,000 (please donāt bother me with accuracy of FX conversions)
Ā£10,000,000,000 / 70,000,000 shares outstanding = Ā£142 (roughly) per share
Valuations seem outlandish to me.
Iām happy to entertain offers to buy my shares in excess of Ā£150.00 per share. Available today only.
At face value the Scalable valuation @ 48% AUA is actually less crazy than Trade Republicās valuation at ~88% AUA.
For reference HL, flatexDegiro trade at ~5% AUA and AJ Bell, Interactive Investor ~2%. Even Robinhood is āonlyā 33%.
I think the market is just incredibly optimistic about these companies at the moment, which makes me worried that the next Freetrade round is going to end up priced way too high for me to pick up any more shares.
Iām not quite sure how you draw the parallel with number of employees. In a competitive market where consumers will look for the lowest cost it seems intuitive that there is a maximum fee that can be extracted for each Ā£1 invested.
Despite the vastly different revenue models, average account size, trading frequency the mature platforms have all converged to a similar value as a % of AUA, thatās completely unsurprising to me.
I think PFOF is the big exception because the company can earn above what a customer is willing to spend, but outside of that I think itās by far the simplest metric to see how much growth is priced into a platform.
Yeah Iām not suggesting the nascent platforms should be valued at 2-5% now, because clearly they are significantly growing their AUA.
To expand my point about earning potential, it seems most of the brokers are able to make around 50bps of revenue.
Peer
Sales/AUA (bp)
AJ Bell
20.99
Interactive Investor
42.28
Hargreaves Lansdown
46.57
Nutmeg (est)
50.00
Trade Republic
60.67
Robinhood (Cash equities*)
65.75
flatexDEGIRO
113.00
Robinhood
221.57
RH is an outlier but if you strip out crypto then the cash equities business is much more inline.
I find it more realistic that the high neobroker valuations reflect an expectation of massive growth in assets rather than an expectation that theyāll be able to charge much more than their peers.
Iāve been playing around with Lightyear as well. The app has a decent interface and is pretty fast in use when converting from Ā£ to $ and also buying shares.
But until they have a much larger choice of shares to buy and ISA & SIPPs I donāt think they are a viable option for most people. They have been releasing regular app updates and Iām sure will improve their offering very quickly but my main account is staying with Freetrade.
The article is in French but Lydia is quite big (4.5 million users at the end of 2020), theyāve raised a total of $160 million, they started expanding in a few European countries and theyāre launching trading + crypto
These āYouāre almost thereā emails from Lightyear arenāt a great look! (for accounts that have only partially completed the onboarding process). Two in two days is spam
