New fundraising round 🎉

what’s terms for convertibles? e.g. 20% off of next round price?

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We’ve not seen the terms for this round yet.

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That is a good point. What people need to realise though is that a convertible loan is debt that the company takes on and has to pay back according to the agreement. What makes it worthwhile for the investors is that they get a discount on the share price at the next round. @yogs 20% question is not taken out of the air … it is not unusual for the discount to be as much as 30%. What make this worthwhile for the companies management is that its avoids a valuation round at this stage. Given the state of the markets this makes sense.

The 30 million tells us that the company obviously needs a considerable war chest for the months ahead and probably needs to revise some of its goals.

IMO the management and the investors have acted prudently. The business opportunity has been validated by the competitors that are springing up. The management will be keen on hitting metrics that make the major investors happy … and it will be good for the company to hit those targets as its next funding milestone will be highly dependent on these.

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Best time to gain market share is when the markets are bad

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The valuation has stayed the same. Therefore the share value as well. (most likely)

Yes and No.

The valuation hasn’t changed due to it being a convertible round. Essentially Freetrade now have £30mn in debt which will convert into equity at a given time in the future (likely a funding round).

The advantage, over a traditional round, to the new participants is they can support a business they already have invested in without getting their own investment marked down plus they’ll get a discount on the price when the debt converts to equity.

It gets money in to the business to support growth while not having a detrimental affect on the valuation. When it coverts there will be dilution from convertible round and from the funding round so the share price will be ‘affected’

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I doubt there’d be many buyers now at the R7 round price ( £9.25 with no EIS )

Article: 12ft |

May I ask why doesn’t freetrade list as a plc and float on the regular stock exchange. I’m sure it has been mentioned somewhere, but i don’t know how to find out

There are very different market dynamics associated with being a public company vs. being a private company. A private company can do whatever it likes (…within reason) whereas a public company has many obligations, as such it is very restricted in what it can and can’t do. A startup is typically defined as a company that is still finding its footing, a business that is still trying to understand how to build a sustainable business long-term: during that phase, the flexibility of being private is invaluable, and the rigidity of being public is very challenging.

You can look at companies like THG for an example of the risks that are associated with being public, which was down something like 80% even before the recent downturn in the market, because of pressures from the public markets – which weren’t concerns of private investors. As an investor in a business, the business going public (much like being acquired) is a great opportunity to realise gains, but if your goal is to remain an investor over the long term, then going public can represent a risk, because it can shine a light on worrying things that the business can hide (and fix in secret) while private.

A great example of the risk of going public is WeWork: they were privately valued at ~$40bn, then they put forward an IPO proposal which highlighted a number of very worrying aspects of their business, and as a consequence, their IPO collapsed along with their private valuation. Last year, they finally went public via a SPAC and as of today, WeWork has a market cap of $5bn – a precipitous fall. Robinhood is a relevant example too, their stock price is down ~80% since their IPO a year ago.

The private market is generally more forgiving than the public markets because there’s an implicit understanding that the company is still trying to find its footing, so for a business like Freetrade, going public now (especially when there’s a downturn which means public market participants are finally applying scrutiny to tech businesses) would be a very risky proposition.

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Pretty much every recent tech / fintech IPO has seen the share price be hammered, Freetrade are hopefully working on their road to profitability and not solely focussing on an imminent IPO.

Also an IPO before March 2023 time removes a lot of investors EIS relief.

An IPO wouldn’t usually invalidate EIS if you hold onto the shares.

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Great news on the additional funding :tada: :tada:

I know this will be used to speed up our access to new markets however I hope this also speeds up a handful of delayed improvements that should be here by now.

• Swipe to remove items from Watchlist

• Improved categories and better collections

• Maybe finally increasing Apple Pay limits (?)

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Thanks for clarifying.

Adam says 2023 and that is good enough for me.

Would love to know the terms of the convertible? I wonder if it will be as generous as MoneyDashboard 100% return in a year. Albeit they had to agree to a 50% return

So if Freetrade has taken out a loan and is paying interest on that loan, can we assume they are now making enough money to cover that extra outgoing?

The interest is paid in shares at the conversion date, isn’t it?

No. That is why it is called a convertible loan. The loan + interest will get converted to shares at a discount.

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Hey. Just in case you hadn’t seen, we’re holding an AMA this week - more details are here: Forum AMA with Freetrade CEO & Founder, Adam Dodds, Thu 26 May

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