Freetrade acquires UK branch of Australian investment platform Stake

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

The move is part of Freetrade's wider bid to strengthen its domestic business and comes as the UK's digital investment platform faces increasing competition from new entrants, particularly US heavyweight Robinhood.

The startup told CNBC exclusively that it has struck a deal with Stake to acquire all of the company's customers and move all assets the company manages in the UK to its own platform.

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

Headquartered in Sydney, Australia, Stake was founded in 2017 by entrepreneurs Matt Leibowitz, Dan Silver and Jon Abitz with the goal of providing affordable brokerage services to individual investors in Australia.

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

After the deal closes, Stake UK's customers will be contacted in the “coming weeks” for details on how to transfer their money and other assets to Freetrade, the company said. Customers will be able to continue using their Stake accounts until their assets and cash are transferred to Freetrade in November.

Freetrade operates primarily in the UK but is looking to expand into the European Union. The platform offers a variety of investment products, including stocks, exchange-traded funds, personal savings accounts, and government bonds. As of April 2024, the number of users exceeded 1.4 million.

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

Freetrade has been a beneficiary of the retail stock investing craze in 2020 and 2021, which has sent GameStop and other so-called “meme stocks” jumping to record highs. In the years that followed, competitors including Freetrade and Robinhood were affected by high interest rates, which dampened investor sentiment.

In 2022, Freetrade announced plans to lay off 15% of its workforce. The following year, the company saw its valuation fall 65% to ₹225 million ($301 million) in an equity crowdfunding round. At the time, Freetrade blamed “different market conditions” for the decline in market value.

But recently, things are changing for startups. Freetrade reported its first-ever half-year profit in 2024, with adjusted earnings before interest, taxes, depreciation and amortization reaching 91,000 for the six months to June. Sales increased 34% year over year to $13.1 million.

“I am focused on expanding Freetrade into the leading commission-free investment platform in the UK market,” CEO Nebehaj said in a statement shared with CNBC. “This transaction demonstrates our commitment to achieving that goal by leveraging inorganic growth opportunities.”

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

Freetrade currently manages over 2 billion assets for UK clients. Globally, staked assets under management exceed $2.9 billion.

Robinhood, a much larger company in the US with $144 billion in assets under management, launched in the UK in November 2023 to great fanfare. Earlier this month, the company launched a securities lending scheme in the UK to further entice potential UK customers.

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