Public.com app displayed on smartphone.
Gabby Jones | Bloomberg | beautiful pictures
American stockbroking startup Public launched its service in the United Kingdom on Thursday, marking its first international expansion that launched in 2017.
The app, backed by celebrities including Will Smith and skateboarding legend Tony Hawk, will offer UK users commission-free trading on more than 5,000 US-listed stocks during the normal trading hours of this country.
The public hopes to expand the UK offering over time to include other asset classes already available in the US, such as ETFs, US government bonds and crypto assets. The company also plans to launch an “investment planner” tool in the future that will allow users to make customized recurring investments.
The UK public launch will see it compete with a host of reputable digital brokers such as AJ Bell and Hargreaves Lansdown, which make money from commissions and management fees. management, as well as emerging companies such as Revolut, Freetrade and eToro, which mainly generate revenue from subscriptions and other fees.
It’s a heavily congested market – but Leif Abraham, co-chief executive officer of Public, has touted the company’s lower forex fees as a factor separating it from the UK package
“Most of our competitors in the UK will charge a currency conversion fee per transaction,” Abraham told CNBC in an interview. “We only do it with the amount deposited, and our fees will be significantly lower than most of our competitors.”
The public will charge a fee of 30 basis points, or 0.3%, on each deposit to convert pounds to US dollars.
The company has European roots, founded in September 2019 by Jannick Malling and Abraham, from Denmark and Germany respectively, who currently serve as Co-CEOs.
The platform that allows people to build portfolios and invest in stocks and cryptocurrencies, has reached over 1 million users by 2021.
It benefits significantly from GameStop Story early 2021 saw the stock prices of the US game retailer and other heavily shorted companies skyrocket on the back of a buzz from the online investor community.
This time period has shed light on the controversial “Pay for Orders” (PFOF) practice, in which brokers are paid by market makers such as Citadel Securities to move orders. of customers to the company.
In 2021, Public removed PFOF from its platform over concerns that it was causing customers to develop unhealthy day-trading habits. It also adds “safety labels” to certain stocks to notify users when certain companies are facing heightened volatility or the risk of bankruptcy.
PFOF has been banned in the UK, while the European Union is planning to follow suit with its own ban on the practice.
The public has taken the route of partnering with a regulated company to provide its services in the UK, rather than applying for its own licence. Dann Bibas, the company’s head of international, told CNBC: “A lot of fintechs have gone down this path.
Public will operate in the UK as an appointed representative of Khepri Advisers Limited, authorized and regulated by the Financial Conduct Authority.
Currently, the UK is the only country the Public is focusing on for international expansion, says Bibas. Going forward, it hopes to learn from its UK launch to expand in other European markets. Public has offices in New York, Copenhagen, London and Amsterdam.
Difficult market conditions
Online brokerage platforms have had a rough time lately. The rising cost of living has made it harder for consumers to part with the cash they already have in the Covid days.
Freetrade, UK brokerage startup, cut its valuation by a whopping 65% last month to £225m in a crowdfunding round, citing a “different market environment”.
Abraham said Public doesn’t have the same problems that many retail brokerage apps face, which have faced capital shortages due to rising interest rates.
“We have a very good cash balance,” said Abraham. “That’s why we can do things like expand to the UK, the US, etc.”
The public sees no reason to raise cash at this stage, he said. It has raised $300 million from investors including Accel, Greycroft, and Tiger Global. Most recently, the company was valued at $1.2 billion, giving it coveted “unicorn” status.
Abraham said that higher interest rates have actually benefited the Public to some extent, as it is earning a return on customer deposits in cash and seeing growing interest in with other assets such as US Treasuries.
Can Public succeed where others have failed?
The public is hoping to avoid the fate of US peer Robinhood, the company abandon UK operations in 2020 home market is preferred. Abraham says he believes this won’t happen in Public’s case.
“We didn’t have to reinvent our business model to break into a new market,” he told CNBC.
“It’s not like – put in another extreme way – like last mile delivery companywhere you have to have a big footprint,” added Abraham. “We can really expand into other markets with a pretty lean team responsible for that.”
However, Robinhood has plans to return to the UK – it will be launched in the country at some point in the near future after acquired crypto trading app Ziglu last year.
