I’ve been reading your comments here and I appreciate the range of reactions.
I wanted to reach out and offer some more context on this deal and what I shared with our team this morning.
When I took over as CEO, I laid out to the team at Freetrade two goals:
- Get Freetrade to a position of strength and,
- Create the future of Freetrade.
We delivered our best performance ever as a business in 2024. We upped our delivery pace, released a lot of new features and products, rapidly grew our segment of customers with £10k+ portfolios, and we became cashflow positive at the end of the year.
This meant we were in a position of strength, and we had a number of inbound expressions of interest in the business both from prospective investors and strategic partners.
To get our growth to take a step up, so that we can truly challenge the incumbents in the UK self-directed investment market, we would need investment in some form.
We considered this investment thoroughly and at length with Freetrade’s management and board - we looked across the universe of potential investments ranging from IPO to primary VC fundraising. Because of the competitive interest in our strong business, we felt that we needed to formally consider our options.
I appreciate that for many of you who backed us after our Series B this means that your investment is being realised at a loss.
This was front of mind as our Board considered Freetrade’s options.
As mentioned above, we considered alternative paths like a capital raise, which would have resulted in heavy dilution for ordinary shareholders, or carrying on reinvesting in our business, that probably would not have resulted in the growth that we need.
As for crowdfunding results, in aggregate we are returning more cash to our crowdfunders than we accepted as investment, an average overall return of 1.1x, with those from Round 1 generating 15x. Of course any investing carries risks and it’s worth mentioning that only 5% of crowdfunded businesses actually ever return any cash to their shareholders.
Everyone who backed us before our Series A generated on average 2.7x and everyone who backed us up to our Series B generated on average 1.7x. For transparency, the returns for each round are here:
| Round | Share Price | MOIC |
|---|---|---|
| July 2016 | £0.08 | 15.1x |
| February 2017 | £0.15 | 7.9x |
| May 2018 | £0.52 | 2.3x |
| April 2019 | £0.84 | 1.4x |
| June 2019 | £0.96 | 1.2 |
| May 2020 I | £2.51 | 0.48x |
| May 2020 II | £2.51 | 0.48x |
| November 2021 | £9.25 | 0.13x |
| September 2022 (Conversion price) | £2.08 | 1x |
| June 2023 | £2.60 | 0.46x |
In reaching this deal our Board balanced what’s best for our shareholders, employees, and, most importantly, our customers.
This deal is going to enable us to accelerate the delivery of an exciting roadmap of new products and features. This means delivering products like mutual funds, JISAs/LISAs, essential improvements to our SIPP, bonds, gilts, and more.
It’s also going to give us the foundations to grow,seriously compete in the investment platform market, and build a fintech out of the UK with strong and consistent backing.
I’m personally grateful for all of our crowdfunders’ backing. I appreciate these words may offer more or less comfort for some, depending on their investment return, but we wanted to provide context.