Freetrade buys UK arm of Australian investment platform Stake

London-based online trading platform Freetrade told CNBC on Tuesday that it has agreed to buy the UK client book of Stake, an Australian investment app.

The move is part of a wider bid by Freetrade to support its domestic business and comes as UK digital investment platforms face increasing competition from new entrants – not least from the US. robinhood.

The startup told CNBC exclusively that it has struck a deal with Stake to take over all of the firm’s clients and move all of the assets the firm manages in the UK onto its own platform.

Freetrade and Stake declined to disclose financial information about the deal, including the value of Stake’s UK customer book.

Stake, which is based in Sydney, Australia, was founded in 2017 by entrepreneurs Matt Leibowitz, Dan Silver and Jon Abitz with the goal of providing low-cost brokerage services to retail investors in Australia.

The company, which also operates in New Zealand, launched its services in the UK in 2020. However, after a recent business review, Stake decided to focus primarily on its operations in Australia and New Zealand.

Following the deal, Stake UK customers will be contacted with details of how to move their money and other assets to Freetrade in the “coming weeks”, the companies said. Customers will still be able to use their Stake account until assets and cash are transferred to Freetrade in November.

Freetrade operates primarily in the UK but has sought to expand into the European Union. It offers a wide range of investment products on its platform, including stocks, exchange-traded funds, individual savings accounts and government bonds. As of April 2024, it had over 1.4 million users.

Earlier this year, CNBC reported that the startup’s co-founder and CEO Adam Dodds had decided to leave the company after six years at the helm. He was replaced by Viktor Nebehaj, the company’s chief operating officer at the time.

Freetrade was a beneficiary of the retail stock investment frenzy of 2020 and 2021, which saw GameStop and other so-called “meme stocks” jump to wild heights. In the years that followed, Freetrade and its rivals, including Robinhood, were hit by higher interest rates, which hurt investor sentiment.

In 2022, Freetrade announced plans to lay off 15% of its workforce. The following year, the firm saw its valuation drop 65 percent to £225 million ($301 million) in a crowdfunding round. At the time, Freetrade blamed a “different market environment” for reducing its market value.

More recently, however, things have changed for the startup. Freetrade reported first half profit in 2024, with adjusted earnings before interest, tax, depreciation and amortization reaching £91,000 in the six months to June. Revenue rose 34% year-on-year to £13.1m.

“I am focused on growing Freetrade into the leading commission-free investment platform in the UK market,” CEO Nebehaj said in a statement to CNBC. “This deal demonstrates our commitment to capitalize on inorganic growth opportunities to achieve this goal.”

“Over the past few months, we have worked closely with Stake to ensure a smooth transition and good outcomes for their UK customers. We look forward to welcoming them and continuing to support them on their investment journeys.”

Freetrade currently manages over £2 billion of assets for UK clients. Globally, Stake has over $2.9 billion in assets under management.

Robinhood, a much larger US player with $144 billion in assets under management, launched in the UK in November 2023 to much fanfare. Earlier this month, the company launched a securities lending scheme in the UK in a bid to attract even more potential British customers.