Freetrade shareholders - what is your exit strategy?

In light of the conversation regarding the angel investor selling their holding on Seedrs, Adam mentioned that if possible he would like any future VC rounds to allow shareholders to sell:

I am now starting to question my own exit strategy.

  • should I sell up (at presumably minimum £9.25)
  • if so should I sell everything or just a fraction
  • should I hold on for the long haul? (After all if a VC pumps in £££millions then they must be confident Freetrade has room for lots more growth).

So a question to existing holders, what are your thoughts regarding your own position?

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I know what the besties from the all in podcast would say “let your winners ride’”

That said is you can sell some and it make a new full difference to your life then you absolutely have a responsibility to the you who made the decision to invest in the first place. Quick with delete there! :wink:

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Would it be sensible to de-risk even your (current) winners?

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Most VC’s exit at IPO
I probably would but not before

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Haha just realised my post may have come across as a bit pompous, not my intention so I deleted it and posted it again with less pomp.

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My plan is to wait for IPO. Even then I might not fully exit if I don’t have to, although I would take some profits.

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I have never been part of an IPO? I daydream that we go to the exchange, a day out, get treated to a fancy meal/party/etc. then get handed a nice big cheque (imagine lottery winners) haha!

In reality most likely just an email asking what you want to do with your shares :rofl:

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Your risk profile and goals are most instructive of what you should/shouldn’t do. For example, if losing your initial investment is a big risk to you then selling a fraction at the first liquidity opportunity to cover your initial investment is sensible, whereas if your goal is to maximise the returns (and can risk losing it all) it makes most sense to hold onto your whole investment until you’re ready to cash out.

Small note with regards to the VC investment: the signals you take from Venture Capital investment have to be considered in the context of the VC model. The VC model is roughly summarised as: make lots of investments, and use the exceptional returns from the rare winners to offset the losses of the majority of losers. That means, when a VC invests in a business, they’re not signalling that they believe it will succeed, they’re signalling that they believe if it succeeds then it will provide substantial returns. For VCs, Freetrade failing is the cost of doing business, whereas for you, it might be devastating.

The long term prospects of Freetrade can be considered in the context of the market and also against similar examples. At the moment, we’re in an unprecedented bull market with a lot of money sloshing around: if we experience a period of economic turmoil, do you think Freetrade will survive or thrive, and do you think if we did enter a period of economic downturn, would you need to cash out your investments to survive? If so, you might be forced to sell at below what the value is today.

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Some useful insights into VC there that I certainly need to consider, thanks.

Not selling for many years, simple :rofl:

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If I can easily cover my base at IPO then I will depending on how high it went. If not then I can stay in for the long term, because arguably I can afford to lose. The share price could tank :slight_smile:

Bear in mind that there will likely be a lock-up period in an IPO (articles allow for up to 180 days), so you may have to sit and watch the share price shoot up and then come back down without being able to do anything. On the other hand it could shoot up and stay up, in which case the lock-up will have done you a favour.

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Have you not been watching Robin Hood since it IPO’d :nauseated_face:

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Robin Hood was built on massive hype on a scale different to FT.

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I think this is a very pivotal year for Freetrade - they can either go on and continue the fantastic growth they’ve had to date, or, they will stagnate and I see the valuation staying broadly the same (dependant on market conditions).

Last year was really disappointing…no EU expansion, Crypto and only a trickle of EU stocks right at the end of the year. All with very little improvements to the app.

If 2022 is the same I think I’ll look to sell all my shares at whatever the current valuation is. At the moment I would like to sell a small portion just to de-risk.

Would happily wait for IPO if they deliver this year.

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Yeah because RobinHood IPOd at 32 BILLION DOLLARS. I doubt early RH investors care what the share price is doing now after IPO.

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How can you sell shares? There doesn’t seem to be any mechanism that allows for this. Am I missing something?

I’d defo like the opportunity offload around 25% off my holding as that alone gives a 1000% return on my total FT investment and leaves 75% riding. I really hope we are not limited to selling 5-10% at the next raise/s as that’s pretty unfair, especially to those that have been in here for many years. There’s no way I can let the whole lot roll at an IPO….

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Why do you believe there will be a lock-up period for crowdfunding investors?

The majority of IPOs have a lock up period, and traditionally a lock up period applies to all shareholders. If Freetrade goes public in a traditional way, then you should expect to be subject to a lock up period, it would be abnormal for you to be able to sell at IPO. Any time you see people celebrating becoming rich at an IPO, it’s unrealised riches.

In The Style had lock up, and so did Made.com (read from Page 172). Deliveroo did have some novel lock up terms:

[…] the lock ups are subject to certain exceptions and there is a partial early release of the lock up after 150 days from Admission for certain selling shareholders if the price of the Shares is trading at 30% or more above the Offer Price […]

Lock ups aren’t a huge deal for early investors because typically people who got in pre-IPO got in at a much lower price, so going public at £x and losing 50% before the lock up expires can represent a loss from the peak unrealised value while also representing a strong gain.

As a pre-IPO investor you should expect to wait 6 months to be able to realise your gains and don’t start spending your new found riches based on the price when the bell rings, but otherwise, not particularly relevant.