His second paragraph says exactly what happened, so not sure how it could be classed as a lie? You would have to claim you only read the first paragraph and somehow didnāt bother to read the second. Not sure thatās the basis of a solid legal challenge.
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Freetrade must have been squeezed really hard by IG Group in their negotiation of the sale for Ā£160m. I wonder if Freetradeās opening gambit was Ā£230m or higher with IGās opening offer being much lower than the Ā£160m to ultimately settle at this figure.
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The massive āRiskā was valuation risk, which was created by management and the founders. They happily pitched funding rounds at those valuations. The shares were not traded, it was not a market dynamic. They knew exactly what they were doing - extract as much cash as possible from the sucker retail investors as possible for as little equity as possible. To raise money at that valuation and then sell out at this price only a few years later, when the business seemingly is actually in a better position, is pure con artistry.
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When I invested (2018 I think) there were no investors with liquidation preference. So I assume they came in later. When those investors subsequently came in did Freetrade and/or Crowdcube explain to existing investors the implications of the new investors with preference shares, and were we given the chance to offload our shares at those times?
Iām only just gaining an understanding of classes with liquidation preference now, as Iām pretty sure it didnāt come up in any of the risk warnings I read from Freetrade or Crowdcube when I invested back in 2018. However it is possible they sent something and provided opportunity to sell when investors with liquidation preference later came in as I didnāt really pay attention to later rounds. Would appreciate it if anyone who has a good knowledge of the timeline of all this could clarify.
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Freetrade was paid 6.4% the Assets under Management.
AJ bell is valued at 2% the asset under management (same multiple of Hargreaves Lansdown)ā¦.
There is a case to say that Freetrade was not worth Ā£160mā¦
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Bit of a pointless stat when Freetrade donāt create revenue via a percentage of AUM.
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its a way to value Investment platforms. The back of the envelope rule is 2% of AUMā¦
Bottom line is that AUM of Freetrade are extremely low at Ā£2.5bn.
Since 2020 AJ bell AUM increased by around Ā£40bnā¦
I mean a company lik Chip has now Ā£5bn of AUM, Moneybox Ā£12bnā¦
I think that Freetrade got a great deal from IG (R2 investor here)
Most of that comes from Cash products through partnerships, with Chip earning around 0.10% to 0.15% after the introductory offer. I imagine itās quite lucrative, especially since people tend to leave their funds deposited rather than moving them elsewhere.
Freetrade could have taken a similar approach to grow their AUM. They didnāt even try to optimise for uninvested cashā¦ which was very strange given that was meant to be one of the ways they make money.
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Broke down my expected losses from each round.
Worse single loss Iāve taken to date, I cannot handle the irony of this. Never backing a crookcube investment again.
Total loss calculation:
Total Investment: Ā£7,212.02
Expected Return at Exit: Ā£2,781.72
Total Loss: -Ā£4,430.30 (Ā£2,781.72 - Ā£7,212.02)
This represents a 61.4% loss on your total investment.
Breakdown by investment round:
ā¢ Jul 2019 (Ā£0.956004): Small profit of Ā£102.96 (440 shares)
ā¢ May 2020 (Ā£2.51): Loss of Ā£738.40 (560 shares)
ā¢ Nov 2021 (Ā£9.2499): Largest loss of Ā£2,619.97 (325 shares)
ā¢ Jun 2023 (Ā£2.60): Loss of Ā£743.87 (527 shares)
ā¢ Sep 2022 Convertible: Loss of Ā£431.02 (485.5769 shares)
I deeply do not want this acquisition to go ahead, but if it doesnāt, there probably will be no return of any capital. I still think Iād rather that be the case and the company tries to break past a rough patch rather than a 61% loss.
I would love to know if Robinhood is a potential buyer or if there is a chance to go public even if it was on AIM.
The company is technically valued at over Ā£100m and is profitable. That is a better financial position then so many public companies.
Finally IG Group is publicly listed, why not just give the crowdcube shareholders a better deal via stock rather than a cash offer?
It just pains me that a company Iāve believed in its vision and story for so long have let its core fan base down in this way.
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Yes, we donāt know whatās going on behind the scenes. If this deal falls through then I donāt know what the alternatives are and where that leaves the company. Outside looking in, it looks like they are struggling to competeā¦
It would complicate the deal, and the VCs probably donāt want to hold shares. In theory there was nothing stopping them offering restricted shares. That could have kept more of the crowd investors on side which would have at least softened the blow.
Sorry for your losses, CYBER. Doubt itās much consolation, but if my maths is right the Jul 2019 and May 2020 rounds are better results once you net out the EIS tax breaks. Jul 2019 more or less doubles the profit, and May 2020 should also have loss relief, turning it into a small profit. I think.
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I donāt think loss relief can turn a loss into a profit, according to this the loss relief is only claimable against the net loss after taking the initial relief into account
For example, if Ā£100,000 was invested into EIS shares and upfront income tax relief of Ā£30,000 was claimed, the effective cost of that investment would be Ā£70,000. If the company fell to zero value, the effective loss for which relief is available is Ā£70,000.
This is not HMRC so It might not be accurate, but HMRCās siteās examples arenāt really clear on that point. Unless someone else knows better?
Itās still very much worth claiming loss relief, especially for the Nov 21 round if itās available as that is a big loss and you might get a decent chunk of it back
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I didnāt participate in that Nov 21 round but to add insult to injury I donāt think it was EIS eligible.
I believe youāre right, EIS was last applicable in the May 2020 round
How so? Could you explain?
I mean:
- Didnāt this sale show that the shares we got and the previous B shares are different - theyāre getting more per share than the crowd investors are? Just off that basis, āThere is no differenceā voids the entire comment.
- Institutional shareholders are getting a lot more than 1x their investment while crowd funders are getting less as a result. The comment doesnt say āat least 1xā. This comment implies that Institutional shareholders will get back their investment but not at a cost to crowd funders because of an unbelievably low sale? If I said to you āif you and Bob invest in me, Bob is entitled to his money back firstā you wouldnt expect me to give bob 5x his money back would you, unless I said āat leastā his money back first?
- The Ā£230m comment implies that they are not going to sell for under Ā£230m, ie āto trigger wed have to sellā. This implies that this wont happen as if a Ā£230m valuation is so low it wont?
- By the by but; Brewdog is known for screwing people over, is this not exactly what Freetrade has done to its crowdfunders.
Hopefully someone will correct me if Iām wrong on this, but my understanding (based on the email we received) is its āseries B1ā and āseries B3ā shares (rather than the B2 shares mentioned in Adamās comment) which are the ones that are different to B investment shares (the class given to crowdfunding investors). I assume B2 shares is just a form of āB investment sharesā, which would align with Adamās comment.
I assume the āseriesā prefix for B1 and B3 refers to institutional investments, and they were given preferential shares meaning they get first dibs on money from any lower valuation sale before whateverās left is distributed to everyone else: https://help.crowdcube.com/hc/en-us/articles/360010736839-What-are-Preference-Shares
From my recollection, when I invested I donāt think I was given a clear warning of the risk posed by investing alongside institutional investors, so this is something Iām only gaining an understanding of now. I guess it was probably in the small print but Iām pretty sure it wasnāt in the risk warnings/survey that weāre required to go through to invest on Crowdcube. Iām a bit annoyed by this.
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For past week it completely slipped of my mind. Time heals everything but we better remember the lessons.
On a general note, I think there a case of govt to intervene if it chooses to.
Lets consider the case of EIS, in which people can claim Tax relief and loss relief, we can say that it is funded by tax payers. May be someone else can explain this better.
From now on any crowdfunding schemes are just money grabbing schemes until proven otherwise.
Lets consider this, if a business has great potential why would we normies get option to invest.
If youāve been playing poker for half an hour and you still donāt know who the patsy is, youāre the patsy. - Warren Buffet
If we generalize this further,
it is not different than all the crypto scams but with a layer of legal protections in between for scammers.
Be safe in the trenches
https://x.com/rampcapitalllc/status/1886926879665410228?s=46
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I have lots to read on here but itās funny that I decided to listen to the intelligent investor again and it seems last time I missed the section about where he talks about IPOs and getting rich from them.
Really interesting section and actully is exactly whatās happended here to freetrade 
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Hi Guys, hope all is well, just wanted some info on how I can retrieve my money from crowdcube?
Any info appreciated.
Thanks
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Painful isnāt it.
Sold out by corruption. Never going through crowdcube again.
I believe it said second half of 2025 so guessing crowdcube will send it over.
Kept my money during inflation and gave me a little back.