Weren’t they trying to do something in Canada and Australia too? I guess those are long dead. I’ve not been keeping up
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A few thoughts:
- Profitable in H1, so I think we can assume they’ll be cashflow positive going forward after reducing European costs (at least excluding the one off wind down costs). That’ll be a single digit million annually which will be invested in UK marketing/product.
- It’s good for it’s core users, as the UK has total focus.
- It will lower the TAM, but large investment would have been required for Europe and I guess they’re thinking they don’t need that to achieve a healthy valuation.
- If they can compound revenues at that 35% then it’ll be at £50m ARR by Q1 2026 (starting at £26.8m Q1 2023 annualised). At 10X Sales that’s £500m, which feels reasonable for a strong cash generative growth company with high quality recurring revenue. There’ll be little diulition along that journey.
- It’ll retain the European (& any other) licences, which could add value in the case of an acquisition.
- It’s sad for the Sweden team and their new CEO who’s been getting media attention, but ultimately must have struggled to get the marketing budget and engineering time needed.
A quote from Viktor, it’s all about growth and achieving that valuation:
“As CEO, I am determined to maintain our team’s focus on executing projects that will drive significant shareholder value”. “Right now, Freetrade is in its strongest financial position in its history.” “It’s more important than ever that we focus on our core market and its enormous growth prospects.”
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Does this also mean the launch in Ireland has been scrapped? They still have an Ireland Waitlist sign-up, so it’s not totally clear.
A company with a 35% growth rate will never get a 10x multiple.
Freetrade at exit will be valued on EBITDA/Cash Flow (like HL and AJ Bell).
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I’m confused now as to who their target demographic is though?
If they focus solely on UK, they’ll need to go deep. Might finally get JISA and employer contributions in SIPP, etc. but that still confuses where they’re going to position themselves with Monzo, Revolut, and companies like ii.
I thought Europe might be their answer to go broad and shallow which may better suit a younger audience.
Hopefully it means they will be able to produce an actual full offering to UK customers now rather than just lots of little offerings.
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Sure, but why should I bet on Freetrade at this stage?
Regulation is the friend of the incumbent, and Freetrade are behind here.
I think their current product is limited. They now need to focus more heavily on keeping their younger user base as their assets grow to also grow their AUM.
They need a good web product, they need LISA, JISA, employer contributions etc. and older users I suspect don’t trade as heavily and zero trading fees become less appealing.
Competition will be tough, curious how they can now achieve a good valuation. Would really like to see a 5 year plan/vision from Freetrade. Of course remaining profitable in this environment is super important so can’t be too sad, but I hope their long term vision is still ambitious.
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If I read between the line this means “bye bye European expansion” ?
As a non-UK resident this is such a disappointing news.
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A long time coming sadly, the amount of (our) resources wasted over the past 8 years is staggering.
So now the focus UK, so how about you offer the one product basically the whole of the UK investment industry is built on (investment funds). It’s not rocket science guys, add a wide range of mutual funds as per other brokers, at say half the management fee of competitors, and watch £10 billion AUA roll into the company in < 24 months. Blows my mind that management has been so scatterbrained with ideas for this and that, and this one core product is not even offered yet after 8 years despite it’s users asking over and over for it.
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Pension Bee’s been around 10X sales over the last couple of years with that growth rate. Plum raised from VC’s and Crowdcube at 8X and it’s a way of profitability.
If new revenue lines are achieved (like share lending) then the growth rate could be higher and the extra cash would fund new growth.
Pension Bee (*ChatGPT!):
- 2022: £17.7 million, a 38% increase from 2021 (PensionBee).
- 2023: £24 million, continuing the upward trend with a 35% increase from 2022 (PensionBee) (MarketScreener).
- 2024, PensionBee is projected to reach annual revenues of approximately £32 million. This marks a continuation of their growth trajectory, reflecting a 39% increase compared to the previous year’s revenue of £24 million in 2023 (PensionBee) (London Stock Exchange) (MarketScreener).
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Plum is not a serious competitor in terms of valuation (VCs got Pref Shares that reduce the risk)
I agree that the Pension Bee valuation is pretty bizarre for such a small and not growing company. Since they sold the US expansion to investors the share price increased dramatically. BUT compared to Freetrade they have a very loyal customer base (the retention rate is over 95%).
IMO the best benchmarking is AJ Bell and HL that trade at around 15x EBITDA (but they have a 50% EBITDA Margin).
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Like a kind of Road Map Thingy?
They failed at every road map they ever had,so they just stopped doing them as it got embarrassing.
3years wasted in Sweden gaining the financial license from Finansinspektionen MAKES ME VERY ANNOYED
I’ve been asking for a JISA for 5 years.
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Completely agree with you
It’s exactly what it means.
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We are focussed on building the right product and going deep. In fact, we are so focused on it that we mostly care about what we will ship this year. For that, we have to concentrate on what we deliver this month, this week, etc.
We have a clear vision for the future - we will be a fully featured self-directed product -, but it only matters if we deliver short-term.
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As a Swedish Freetrade-user this is very disappointing news. Freetrade has never made any effort to adapt and get traction in the Swedish market. The app only had very limited functionality and contained lots of references to British accounts (ISA?). They should have taken themselves and their customers more serious. Too bad.
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Its a shame, but totally expected.
FT is a shambles. I invested early and am in the first 25000 users. I have been here from the start and watched with disappointment as all the hope and enthusiasm from the community has been squandered.
Maybe Victor can turn it around but I can’t really see it.
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It’s a great and trusted company. The disappointment is from an investor standpoint. We were promised so much every investment round. Projections were a pipe dream.
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I’m glad the expansion has been halted. Freetrade are already in profit so even if they spend next year or two developing solid features that customers are asking for it just means once they are ready to expand again they will have a better product which hopefully has caught of with competitors in that time.
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I think this is a really good move from Viktor.
Freetrade struggled to get any growth in Sweden and that would not have changed without considerable time and investment.
(I was always against expanding into Sweden, it never made any sense to me, so I’m glad to see no more money will be wasted on it.)
This is the kind of bold decisions you want a new CEO to make!!
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