Freetrade: IG Group swoops for trading app
IG Group has acquired stock trading app Freetrade for £160m, as the FTSE 250 firm looks to target a new UK audience of traders.
The trading platform, along with its 720,000 customers and £2.5bn in assets, will move to IG Group in mid-2025, subject to regulatory approval, the firm said in a stock exchange notice today.
Throughout 2024, revenue at Freetrade increased 32 per cent to £27.5m, leading to a positive operating profit for the first time.
In the first half of the year, investors piled £233m onto the platform, with net flows up 87 per cent.
“This is a rare opportunity to strengthen IG’s UK trading and investments offering and broaden our target addressable market,” said IG Group chief executive Breon Corcoran.
“Freetrade is one of the most successful emerging players in the UK direct-to-customer investment market, with a strong brand, highly scalable technology and delivering rapid growth.”
In 2022, rumours emerged that JP Morgan was looking to acquire Freetrade, following its acquisition of Nutmeg.
“This is an exciting opportunity to accelerate our growth and delivery of new products and features on our award-winning platform,” said Viktor Nebehaj, chief executive and co-founder of Freetrade.
“IG’s vision for Freetrade is closely aligned with our own and its backing will be of huge benefit as we continue to scale the business.”
The company added that Freetrade’s leadership team will remain with the firm and continue to scale the business.
Analysts at Shore Capital said that while the deal “looks like a sensible use of existing resources,” it’s not expected to “transform the business or balance sheet anytime soon.”
The analysts added that the deal will bolster IG’s existing “underdeveloped division in this space,” and should help revenue grow faster than the rest of the group “given ad-valorem platform pricing and typically high rates of customer retention.”
What does Freetrade do?
Freetrade is a direct-to-consumer trading platform launched in 2018 that offers commission-free shares, ETFs, and gilt trading.
In August, Freetrade also launched a share lending service, meaning investors could lend their shares out to short sellers.
The service is not offered by mainstream platforms like Hargreaves Lansdown and AJ Bell, as it has some downsides, such as risks of the borrower defaulting and losing share voting rights.
However, Freetrade said it would hold collateral of safe assets like cash or bonds worth at least 105 per cent of the value of the shares on loan, and the platform said it would make up the difference if the collateral proved insufficient.
Freetrade investors have had a mixed reaction to the sale, with some describing the deal to Sky News’ Mark Kleinman as “nonsensical” due to representing a fraction of the valuation from its recent fundraising rounds.
“I feel completely robbed by Freetrade and will lose 87 per cent of my investment as a result of this nonsensical deal,” one investor said.
However, FTSE 250 technology venture capital business Molten Ventures saw shares jump two per cent today after the deal represented a 30 per cent premium to its £17m stake in the firm.
IG Group’s capital returns
IG Group’s full-year results are set to be released on 23 January and it also said today that its existing share buyback programme of £150m announced in July is expected to be extended.
“We believe strong capital returns, a more streamlined cost base and discounted market valuation present an attractive risk/reward dynamic for IG Group shares over 2025,” said Ben Bathurst, analyst at RBC Capital Markets.
“Furthermore, we were impressed by the debut outing of new CEO Breon Corcoran, who has conveyed conviction over the growth potential for the group, including for the over-the-counter business, which we believe was de-emphasised under previous management.”