Freetrade faces investor backlash over sale to IG - report
By Frank Prenesti
Date: Thursday 16 Jan 2025
(Sharecast News) - Online trading app Freetrade reportedly faces a backlash from early investors after announcing a £160m sale to IG Group - a fraction of the valuation it targeted during earlier fundraising talks.
A number of Freetrade shareholders were angry at the takeover, with one calling it "a nonsensical deal".
"I feel completely robbed by Freetrade and will lose 87% of my investment," one unnamed investor told Sky News. "Crowdfunders like me supported them in their growth journey and now they have dropped us like a stone when they no longer need us.
"If the business was in trouble I'd understand accepting a low offer to secure some returns for shareholders, but Freetrade has grown revenue and turned a profit for the first time. IG got a good deal but it comes at the expense of small investors."
The deal, worth up to 119p-a-share to Freetrade investors, comes just months after it reported the first profitable half-year in its six-year history.
Less than six months ago, Viktor Nebehaj, Freetrade's co-founder and chief executive, told Sky News: "Right now, Freetrade is in its strongest financial position in its history. It's more important than ever that we focus on our core market and its enormous growth prospects."
Investors were also said to be unhappy that fees associated with the transaction would be deducted from the proceeds to shareholders.
"They are rubbing salt in the wound," said one.
Freetrade targeted a valuation of about £700m during fundraising talks in 2022, although those discussions failed to result in a deal. It subsequently held talks with JP Morgan about a takeover, but those too were aborted.
A spokesman for the company said that the sale price represented a 15-times return for Freetrade's first investors.
Those who invested before its Series A round would see an average return of 2.7 times their money, while investors who backed it ahead of its Series B round would see a return on average of 1.7 times.
Reporting by Frank Prenesti for Sharecast.com
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