Share trading app Freetrade to crowdfund for ninth time

A STOCK trading app that was in talks to raise money from venture capitalists at a £700m valuation has been forced to turn to crowdfunding for the ninth time in six years.

Freetrade has asked retail investors for a fresh cash injection after an investment fell through in December.

The UK start-up has announced plans to crowdfund at least £1m, which will take the form of convertible notes.

The terms mean shares are in effect being offered more cheaply than the company’s last funding round in November, when it raised £8m on Crowdcube at a valuation of £650m.

The notes will convert to shares when the business next raises money, either at a £400m valuation or at a 20pc discount to the future funding round, whichever is lower. This means the shares will ultimately be priced lower than in last year’s capital raise.

Weeks after securing that valuation, a funding round at a higher valuation fell through, Adam Dodds, the chief executive, told investors in an email.

Mr Dodds said: “In parallel to the last crowdfunding round, I was also having conversations with potential new institutional investors about a Series C, guiding the crowd’s valuation. Things got advanced enough that I signed a term sheet in December to raise funds at a £700m pre-money valuation.

“During the advanced stages of this deal, the macroenvironment began to reverse abruptly, and venture markets seized up – the deal did not complete.”

The Freetrade founder blamed “a chill in the venture funding market” for the round’s collapse. Freetrade laid off 15pc of its staff earlier this summer. It has raised crowdfunding every year since 2016, totalling £25m.

Robinhood, the US app that offers similar services, has seen its market value crash 75pc since its $30bn (£26bn) listing in New York last summer.

Freetrade said it was aiming to cut its burn rate to £1m per month. The new crowdfunding round will launch on Sept 14. The deal will mean it does not have to provide a set valuation on the new shares or devalue its current shareholders. Mr Dodds said revenues in the 12 months to August were up 30pc year on year, to £15.6m.