Freetrade, the British stock-trading app, is facing a backlash from early investors after announcing a sale to London-listed IG Group for a fraction of the valuation it targeted during earlier fundraising talks.
Sky News has spoken to a number of Freetrade shareholders who reacted with dismay on Thursday to the £160m sale of the company.
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.
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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.”
The takeover was described by one early investor as “a nonsensical deal”.
More from Money“I feel completely robbed by Freetrade and will lose 87% of my investment as a result of this nonsensical deal.
“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 shareholder said he would immediately close his Freetrade account.
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Investors were also unhappy that costs 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.
The company 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.