social mediaKey Takeaways:
– British application, Freetrade, is bought by online investing platform, IG Group.
– The deal values Freetrade at $195 million, a 29% discount compared to its previous valuation.
– Freetrade, established in 2016, gained popularity as a zero-commission trading platform among young traders.
– Despite significant drops in valuation due to the pandemic’s impact on global economic conditions, Freetrade’s founders believe the acquisition will further their growth.
IG Group Acquires Freetrade
In a notable development, IG Group, an online investing platform, recently acquired Freetrade. Known for its zero-commission trading platform, the British application, often compared with Robinhood, will now continue under the ownership of IG Group. This significant business deal pegs Freetrade at $195 million, 29% lower than its last valuation.
Freetrade: The Rise of a Trading Giant
Freetrade, known in the U.K for its appeal to younger, less experienced traders, has seen immense popularity since its founding in 2016. The company’s unique business strategy to begin by offering equities quickly garnered a wide fanbase. It later introduced trading in exchange-traded funds (ETFs), savings products, and government bonds, increasing its market presence.
The application saw remarkable growth during the pandemic with the retail trader frenzy. The infamous GameStop “short squeeze” in early 2021, where sellers bought large quantities of the retail company’s stock, causing a significant price surge, also impacted Freetrade positively.
Understanding Short-Selling in the Market
The term “short selling” is referred to a practice where investors borrow an asset, sell it on the open market with prospects of repurchasing it for lesser money with a future date in sight. This expectation bakes in the probability of making a profit by selling the asset higher than it would be repurchased.
Macroeconomic Conditions and Their Impact
The turn of events in the global economic scenario in 2022 and 2023 did not bode well for companies like Freetrade that had seen unprecedented heights during the pandemic. The company succumbed to the harsh realities of the worsening conditions, completing a crowdfunding round with a valuation of £225 million in 2023, a staggering 65% decrease from its £650 million worth previously.
Freetrade and Its Future
This recent deal opens up possibilities for increased consolidation in the wealth technology industry. This notion comes in the wake of Hargreaves Lansdown being acquired for £5.4 billion by a consortium led by the private equity giant, CVC Group.
Viktor Nebehaj, CEO and Co-founder of Freetrade, hailed the takeover as ‘transformative’. This change, according to Nebehaj, could lead them towards accelerated growth due to IG Group’s substantial resources and backing. It also presents an exciting opportunity for Freetrade to roll out new products and features.
Freetrade asserted that the transaction is subject to customary closing conditions, including approval by regulatory bodies. The company is hopeful of successfully closing the deal later this year, ushering a new era of growth and opportunities for the brand.