IG Deal Cuts Freetrade’s Valuation By Over a Quarter: Shareholders Backlash

Following the acquisition by IG Group, Freetrade is facing backlash from its early investors as the £160 million cash deal was more than a quarter lower than its previous fundraising valuation, Sky News reported.

Significant Valuation Cut

However, a Freetrade spokesperson pointed out that the sale returned early investors 15 times their investments. The Series A round investors received an average return of 2.7 times their investment, while Series B investors received an average of 1.7 times.

According to Crunchbase, Freetrade raised $160 million since its inception in 2016. It attempted to raise funds at a valuation of about £700 million in 2022, but those talks did not materialise.

London-listed IG bought 100 per cent of the British stock trading company in a push to expand its product offerings in the United Kingdom. However, Freetrade will continue to operate independently with its existing management team remaining in charge.

A Bad Deal for Early Investors

“I feel completely robbed by Freetrade and will lose 87% of my investment as a result of this nonsensical deal,” an early Freetrade investor told Sky News.

“Crowdfunders like me supported them in their growth, 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.”

Indeed, Freetrade became a profitable company in the first half of 2024. In those six months, it reported a gross profit of £12.3 million and an adjusted operating profit of £91,000, marking a significant turnaround from an adjusted loss of £5.6 million in the same period the previous year.

“IG got a good deal, but it comes at the expense of small investors,” the Freetrade investor added.

Furthermore, the costs associated with the sale will be deducted from the proceeds of the existing Freetrade shareholders. The deal, however, requires regulatory approval to be finalised.