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Highlights
- Strategic Acquisition: IG Group acquires commission-free investment platform Freetrade for £160 million, expanding its UK trading capabilities and customer base.
- Growth and Technology Synergies: Freetrade, with 720,000 customers and £2.5 billion in assets under administration (AUA), brings strong brand recognition and scalable technology to IG.
- Investment and Product Development: IG will reinvest in Freetrade’s growth, accelerating its product roadmap, expanding its offerings, and investing in marketing to drive further customer acquisition.
IG Group Holdings plc (LSE:IGG), a leader in online trading and investments, has announced the acquisition of Freetrade, the UK’s fast-growing, commission-free self-directed investment platform, for £160 million. This acquisition is poised to enhance IG’s UK trading and investment offerings and grant access to new customer segments, marking a significant step in IG's growth strategy.
Strategic Rationale and Market Opportunity
The acquisition strengthens IG’s position in the UK market, especially within the direct-to-customer investment segment. Freetrade, known for its simple, user-friendly platform and transparent pricing, provides a wide array of financial products, including over 6,200 global stocks and ETFs, fractional shares, ISAs, SIPPs, and more. With a growing market for self-directed investing, Freetrade's innovative approach and strong client base make it a natural fit for IG’s expansion.
The UK direct investing market is forecast to continue its growth trajectory, driven by trends such as increased financial literacy, pension freedoms, and the digitalisation of financial services. Freetrade’s strong brand, proprietary technology, and efficient customer acquisition methods significantly broaden IG’s addressable market.
Impressive Growth and Financial Performance
Since its launch in 2018, Freetrade has become one of the fastest-growing platforms in the UK, reaching 720,000 customers by the end of 2024, with assets under administration (AUA) totaling £2.5 billion. The platform has shown strong growth momentum, with AUA rising from £1.2 billion in 2022. Notably, customers with AUA of £10,000 or more have significantly increased, underscoring Freetrade's ability to attract high-value clients.
Revenue for Freetrade grew 32% year-on-year to £27.5 million in 2024, marking a record performance in Q4. This diversified revenue stream, from subscriptions, foreign exchange transaction fees, and interest income, has also led to positive EBITDA for the first time, signaling a successful scaling phase.
Future Growth and Investment Plans
IG plans to operate Freetrade as a standalone business, maintaining its brand and leadership team, including Viktor Nebehaj, CEO and co-founder of Freetrade. The acquisition will allow IG to accelerate Freetrade’s growth by expanding its product range, hiring talent, enhancing features, and increasing marketing efforts. IG intends to reinvest the majority of Freetrade’s forecast profit back into growing the business over the next two years.
Financial Terms and Outlook
IG will acquire 100% of Freetrade for £160 million, funded from existing capital resources. The completion of the deal is subject to customary regulatory approvals and is expected to close in mid-2025. The acquisition is projected to deliver a return on invested capital exceeding IG's weighted average cost of capital in the third to fifth years following completion.
As of 31 May 2024, IG reported surplus regulatory capital of £638 million, and the acquisition will not impact the Group’s strong financial position. IG also plans to extend its £150 million share buyback programme, subject to regulatory approval, as part of its ongoing capital allocation strategy.
