In a significant move within the UK investment platform market, IG Group has announced the acquisition of Freetrade, the popular commission-free trading app, for £160 million. The deal, set to be completed by mid-2025, aims to strengthen IG Group’s UK investment offerings and expand its customer base. While this move marks a strategic milestone for both companies, many of Freetrade’s crowdfunding investors feel short-changed.
Freetrade’s Rise and Acquisition Details
Freetrade, founded in 2016 and launched in 2018, quickly became a favourite among younger investors and those new to trading, thanks to its user-friendly app, zero-commission trading model, and standout branding. By the end of 2024, Freetrade reported 720,000 customers and £2.5 billion in assets under administration (AUA).
Despite challenges during the fintech downturn, Freetrade achieved its first half-year profit in 2024, reporting a modest operating profit of £91,000 after years of financial losses. However, the £160m valuation offered by IG Group sharply contrasts Freetrade’s previous £650m valuation during its 2021 peak, leaving investors in earlier funding rounds facing significant losses.
A Blow to Crowdfunding Investors
Freetrade conducted multiple crowdfunding rounds through Crowdcube, raising millions from retail investors who believed in its growth potential. At its peak, shares were sold for £9.25 in 2021. Today, with IG Group’s acquisition, these shares are valued at £1.19 each, representing an 87% loss for some early investors.
One disillusioned investor, who initially put £30,000 into Freetrade during the 2021 funding round, revealed they would receive only £3,800, calling the deal “a betrayal of small investors.” Others expressed frustration over transaction costs being deducted from proceeds, further eroding returns.
While Freetrade’s leadership stated that the sale would bring long-term benefits, some investors argue that the company has prioritised institutional backing over retail investors who fuelled its early growth.
Why the Valuation Dropped
Freetrade’s decline in valuation reflects broader market trends affecting the fintech sector:
- Post-Pandemic Slowdown: The surge in retail trading during the pandemic, driven by events like the GameStop short squeeze, faded as normality returned.
- Macroeconomic Pressures: Rising interest rates and subdued retail trading have placed pressure on fintech valuations.
- Market Consolidation: Increasing competition and the need for scale have pushed smaller players like Freetrade to seek partnerships with larger firms.
These factors contributed to Freetrade’s struggles to maintain its pandemic-era growth and led to its eventual sale at a discounted valuation.
IG Group’s Vision for Freetrade
Despite the backlash, the acquisition offers potential advantages for Freetrade and its remaining investors. IG Group has confirmed that Freetrade will remain a standalone brand with its leadership team, led by CEO Viktor Nebehaj, intact. The resources from IG are expected to accelerate Freetrade’s growth, expand its product offerings, and enhance its technology.
Breon Corcoran, CEO of IG Group, highlighted Freetrade’s scalable technology and strong brand as pivotal to the deal. The acquisition is also expected to generate a return on investment within 3–5 years, leveraging IG Group’s surplus regulatory capital of over £600m.
What’s Next for Investors?
The deal underscores the risks associated with investing in early-stage companies through crowdfunding. While Freetrade has delivered positive financial milestones, the steep drop in its valuation highlights the volatile nature of fintech investments.
For everyday investors, the acquisition also raises questions about loyalty and the ethics of start-ups prioritising larger buyouts over fair returns to early backers. However, some investors who entered at earlier rounds may see returns up to 15x, offering a silver lining for a minority.
Final Thoughts
The acquisition of Freetrade by IG Group represents both an evolution in the wealth technology sector and a cautionary tale for retail investors. While IG Group’s backing may ensure Freetrade’s continued growth, the deal has left many crowdfunding investors with significant losses. As the fintech industry continues to consolidate, understanding the risks and rewards of investing in start-ups will remain crucial for those navigating the dynamic world of early-stage investing.
Feel free to reach out if you have concerns about the Freetrade-IG deal or need guidance on investment platforms. As a seasoned investor and Freetrade user myself, I can provide actionable insights for managing ISAs, SIPPs, and Plus plans effectively.
