IG Group Holdings plc has officially announced its acquisition of Freetrade for £160 million, marking a significant shift in the UK trading and investment sector. The deal will position IG to broaden its reach and solidify its standing within the increasingly competitive market.
Freetrade, known for its user-friendly investment platform, has attracted considerable attention since its launch, particularly among millennials and new investors seeking easy access to commission-free trading. This acquisition reflects not just the financial value of Freetrade, estimated at £160 million, but also the strategic importance of the burgeoning DIY investment space.
Breon Corcoran, CEO of IG Group, emphasized the opportunity presented by the acquisition, stating, “This is a rare opportunity to strengthen IG’s UK trading and investments offering and broaden our target addressable market. Freetrade is one of the most successful players in the UK direct-to-customer investment market, with a strong brand, highly scalable technology, and rapid growth.”
The acquisition will enable Freetrade to maintain its operational independence, with its established brand and management team intact. Viktor Nebehaj, co-founder and CEO of Freetrade, expressed optimism about the future, highlighting the potential for accelerated growth and the enhancement of product features thanks to IG's resources. “We’re grateful for the support of our crowdfunding investors throughout our standalone business. Together with IG Group’s significant backing, this is an exciting opportunity to accelerate our growth and delivery of new products and features,” exclaimed Nebehaj.
Freetrade has demonstrated impressive growth metrics, reporting significant increases across various indicators. Notably, the platform's assets under administration (AUA) surged by 52% over the past year, reaching £2.5 billion by the end of 2024. Revenue followed suit, climbing 32% from the previous year, resulting in £27.5 million, and the company achieved earnings before interest, taxes, depreciation, and amortization (EBITDA) of £2.1 million for FY 2024.
Despite the promising figures, Freetrade has faced economic hurdles, including considerable losses amassed since its inception. At one point, its valuation plummeted by 65% from £650 million to £225 million during its 2023 crowdfunding round, prompting operational adjustments such as laying off 15% of its workforce. Nevertheless, the demand for Freetrade’s agile trading platform has remained strong, particularly among retail investors.
The acquisition aims to capitalize on the structural growth drivers within the self-directed investing market, which has expanded at roughly 10% per annum, fueled by increased financial literacy and demand for accessible investment solutions. Corcoran remarked, “The growing popularity of self-directed investing and individual responsibility for retirement planning is clearly evident, and Freetrade positions us well to leverage these trends.”
From its founding in 2018, Freetrade has carved out its space against traditional investment platforms like Hargreaves Lansdown. By offering over 6,200 global stocks and ETFs, along with fractional shares and innovative features, it has amassed around 720,000 customers. Its growth has been complemented by the high retention rates of users derived from competitive pricing and minimal trading fees.
Looking forward, IG plans to invest heavily in the continued enhancement of Freetrade’s product range, hiring additional talent, and ramping up marketing activities. Notably, the company's strategy encompasses diversifying revenue streams, which currently include subscription fees, foreign exchange transaction fees, and interest income.
While the acquisition has generated enthusiasm among some investors, responses have been mixed. Early crowdfunding investors stand to gain tangible returns, but those who invested later are likely seeing losses, raising conversations about the valuation’s fairness. Crowdfunding analyst Seb Johnson detailed the returns for various shareholder classes, indicating some might receive returns significantly lower than anticipated during prior investment rounds.
Nonetheless, IG stands firm on its intentions to create synergies through this acquisition. Analysts view the move as wise, noting it could lead to revenue growth exceeding the firm's current forecasts and strengthening IG's position within the digital trading marketplace.
Completion of the deal is contingent upon receiving customary regulatory approvals, which IG anticipates securing by mid-2025. Until then, the focus remains on integrating Freetrade's operations within IG's broader strategy for UK trading.