Freetrade Valuation Model

If I’ve missed it let me know!

Yeah the model handles dilution, I just set as 0 for a more optimistic outlook, but obviously that’s not realistic - so feel free to adjust accordingly.

I’m very open to feedback on any of my inputs, I’m sure there’s a lot of room for improvement.

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I never spend much time at all on start up valuations, but giving the success of FT, I can see your enthusiasm around it.

Where do you get the current share price of £10.90 ? That’s enormously high! ii has just a £1.5 Billion valuation with some 55 Billion AUM …

10.9 is just a placeholder guess until we get the next funding information. I agree it seems like quite a lofty estimate, but we’ll have to see.

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Based on Adam’s tweet it seems like I was a little optimistic on the share price (although part of that was because the #shares are higher than I expected). I’ll update the inputs tomorrow when we get the details.

My 2021 revenue estimate was about right at £10.9m vs 12m reported, although much lower than the run rate of £24m. I expect this is partly because I exclude FT+ interest payments, but probably still a big underestimate on turnover and FT+ adoption - I intentionally went a bit low because FT has grown so much this year the backwards revenue is always going to be lower than the run rate.

Interesting to get an active user figure of 500k / funded users figure of 600k that’s probably going to be much more useful number than #sighups going forward because it should be more comparable to other companies’ user metrics.

Interesting they still project £100m revenue next year, so they must be expecting a lot of inflows. It’s impressive they are giving such high guidance still after quite a big miss this year. They projected £92m for 2022 back in 2019, so they are increasing that estimate despite missing their 2021 goals by ~-66-75% so that’s a lot of catching up to do.

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I saw this tweet from Adam saying he expects next year’s revenue to be £100m+, they currently have £1b in assets. Assets will have to increase many times over otherwise that would be 10% of people’s assets being paid in fees! Which is not great for users.

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Yeah 1000bps would be unprecedented. When they projected £92m revenue for 2022 that was based on £15bn of assets. If you want to average £15bn over 2022 you need to either ramp really quickly at the start or end up at perhaps 20-25bn by the end.

Maybe we’ll get FT++ which costs £100/month and pays £97 interest to boost the revenue figure

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You joke but I do think the product needs to improve to attract and retain larger accounts.

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I think the relevant margin here is £24m / £1,000m (AUA) which gives about 2.4%.

So working backwards £100m / 2.4% = ~£4b minimum next year.

I think they’ve cohort data which helps them make better forecasts, i.e. what is the average AUA and revenues of an average 3-year vs 1-year vs newly acquired customer.

I think the other consideration is also the valuation multiple:

  • LTM revenues works out to £650m / £12m = 54x (too high)
  • RR revenues works out to £650m / £24m = 27x (still looks too high?)
  • Forward revenues works out to £650m / £100m = 6.5x (closer to current market valuations?)

Whether £650m turns out to be overpriced or underpriced will depend on the annual revenues achieved next year, and this obviously assumes they should be valued on revenue multiples.

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Pitch deck is a bit underwhelming in terms for forward guidance so I haven’t really been able to do much with that, they’ve really cut back on the detail.

That said I’m feeling somewhat vindicated by this statement: (A lot of forum users have disagreed with me on this point)

image

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I think my post suits better on this thread:

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He said that was his view on the tweet i.e. the board may have signed off the more conservative forecast on the pack.

Looking at the red cohort on the AUA chart, it shows the impact a huge influx of customers can have! They must be anticipating this in Europe and awaiting to monetise existing newer cohorts.

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I was also confused, but I think he meant annual reoccurring revenue

I actually think that chart would be good for modelling average assets per user growth. Looking at some of the earlier cohorts (pink cyan, purple) their assets approximately doubled between Sept 20 and 21.

It’s a bit harder to figure out how much is inflows vs growth because lots of the memestocks have also doubled+ over that time. Based on Freetrade’s top buys and the volatility in that chart I think a significant amount of that is Tesla, GME, AMC etc…

Revenues Run rate: £24m
Valuation: £650m
Multiple on Revenues: 27.0x

its a fair multiple. Fintech at Series B, C are priced at around 30x the annualised revenues

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