Amid a notable downturn in financial technology companies and a market slowdown, Freetrade, a stock trading startup , has reduced its valuation by 65%. The investment application prepares for a forthcoming crowdfunding campaign, thus revising its business valuation to £225 million. It is a significant drop from the previous £650 million reached in November 2021.
Freetrade Cuts Valuation in Response to the Current Market Environment
Although the markdown by Freetrade seems drastic, it reflects current market conditions and tech companies' response to the increasing interest rates. This turbulent scenario echoes similar setbacks faced by Robinhood, a US-based stock trading company, which witnessed a plunge of 70% in its stock price since its public debut in July 2021.
The once-booming consumer trading and finance apps gained massive traction during the Covid-19 lockdowns. At the time, people with surplus funds sought to use their time while staying at home. However, the pandemic has ended, alongside a huge boom of interest in trading apps.
Freetrade has made its mark by offering commission-free trading and has raised over £110 million to date. With around 700,000 customers and £1.4 billion of assets under administration, the startup is a significant player in the field despite its recent setbacks. Those setbacks include a loss of £3.3 million in Q1 2023 on revenues of £4.7 million and cost-cutting measures like a round of redundancies last summer.
"We've seen the longest bull market in history come to an end, and valuations of public companies fall. Freetrade is no different," Adam Dods, the CEO of Freetrade, commented. Freetrade, supported by London-based Molten Ventures and New York's Left Lane, unveiled its new valuation in anticipation of a crowdfunding round scheduled for later this month. During the latest crowdfunding round, the startup was able to raise over £1 million.
Trading Startups Cut Valuations
The aforementioned example of Robinhood demonstrates that not only Freetrade was compelled to cut its valuation in the face of current market conditions. Recent months have shown that many other startups and companies offering trading to retail investors have followed the same path.
In December 2022, Checkout.com, a popular global payment processing firm, cut its valuation from $40 billion to $11 billion. The 70% reflected the 'current macroeconomic conditions'. In addition, Checkout.com slashed the price at which its employees can exercise their stock options.
Stripe, a prominent financial infrastructure platform, announced a similar move in March. The company has raised $6.5 billion in a Series I funding round at a valuation of $50 billion. It was a sharp decline compared to previous fundraising from two years ago when it was valued at $95 billion.
Furthermore, Schroders, one of the key shareholders of Revolut, decided to reduce the fintech giant's valuation by $15 billion in April. This adjustment put Revolut's valuation at $17.7 billion, marking a substantial drop from the $33 billion it achieved after a financing round in July 2021.
