Freetrade Competitors

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 that’s the market price of the neighbour’s house, Freetrade would be valued roughly @ £10,000,000,000 (please don’t bother me with accuracy of FX conversions)

£10,000,000,000 / 70,000,000 shares outstanding = £142 (roughly) per share

Valuations seem outlandish to me.

I’m happy to entertain offers to buy my shares in excess of £150.00 per share. Available today only.

10 Likes

At face value the Scalable valuation @ 48% AUA is actually less crazy than Trade Republic’s valuation at ~88% AUA.

For reference HL, flatexDegiro trade at ~5% AUA and AJ Bell, Interactive Investor ~2%. Even Robinhood is ‘only’ 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.

3 Likes

Yeah

Got to love QE liquidity in search for a suitable bride/groom

Valuing a broker as a % of AUA makes no sense. It’s like trying to value a company based on its number of employees.

The revenue models are so different…

I’m 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 £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, that’s 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 it’s by far the simplest metric to see how much growth is priced into a platform.

3 Likes

Traditionally Assets Management Companies are valued as a % of AUM (usually around 2.0%-2,5% of AUM).

Not sure this methodology is correct for Neo banks or Neo brokers.

For reference Robinhood is valued around 40% of AUM.

1 Like

Yeah I’m 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 they’ll be able to charge much more than their peers.

8 Likes

Bud adding crypto

Shares is launching in the UK. Interesting social aspect Integrated in their product.

1 Like
1 Like

Damn it! I was hoping Tiger might be looking at FT they love pumping up valuations!

1 Like

I’ve been using lightyear and it actually quite like it does anyone else have opinions on it?

Please don’t say things like that :joy::joy:

I’ve been playing around with Lightyear as well. The app has a decent interface and is pretty fast in use when converting from £ to $ and also buying shares.

But until they have a much larger choice of shares to buy and ISA & SIPPs I don’t think they are a viable option for most people. They have been releasing regular app updates and I’m sure will improve their offering very quickly but my main account is staying with Freetrade.

1 Like