The Public.com app displayed on a smartphone.
Gabby Jones | Bloomberg | Getty Images
US stockbroking start-up Public launched services in the UK on Thursday, marking its first international expansion in 2017.
The app, backed by celebrities including Will Smith and skateboarding legend Tony Hawk, will offer UK users commission-free access to over 5,000 US-listed stocks during regular UK trading hours trade.
Public hopes to expand its range of products in the UK over time to include other asset classes already in the US, such as ETFs, US government bonds and crypto assets. The company also plans to launch an “investment plan” tool in the future that will allow users to make customized recurring investments.
Public’s UK debut will compete with a range of established digital brokers such as AJ Bell and Hargreaves Lansdown, which make money from commissions and management fees, as well as upstarts such as Revolut, Freetrade and eToro, which generate most of their revenue. From subscription fees and other fees.
It’s a heavily crowded market, but Public co-chief executive Leif Abraham praised the company’s low foreign exchange fees as a factor that sets it apart in the UK
“Most of our competitors in the U.K. charge a currency conversion fee on every transaction,” Abraham told CNBC. most competitors.”
The public will be charged 30 basis points, or 0.3%, on every deposit that converts sterling into dollars.
The company originated in Europe and was founded in September 2019 by Jannick Malling from Denmark and Abraham from Germany, who are now co-CEOs.
The platform, which allows people to build portfolios and invest in stocks and cryptocurrencies, surpassed 1 million users in 2021.
It benefited greatly from the GameStop saga in early 2021, with shares of the U.S. gaming retailer and other heavily shorted companies soaring on the back of a community of online investors.
The period highlighted the controversial “pay for order flow” (PFOF) practice, whereby market makers such as Citadel Securities pay brokers to route client orders to the firm.
In 2021, Public removed PFOF from its platform, fearing it would drive clients into unhealthy day trading habits. It has also added “safety tags” to certain stocks to notify users when certain companies are at risk of wild swings or bankruptcy.
PFOF has already been banned in the UK, and the EU plans to follow suit and ban the practice.
Public has opted to work with an already regulated company to offer its services in the UK, rather than apply for its own licence. “A lot of fintech companies have been down this road,” Dann Bibas, the firm’s head of international operations, told CNBC.
Public will conduct business in the UK as an appointed representative of Khepri Advisers Limited, which is authorized and regulated by the Financial Conduct Authority.
Currently, the UK is the only country where public attention is paid to its international expansion, Bibas said. In the future, it hopes to build on what it has learned from its launch in the UK to expand into other European markets. Public has offices in New York, Copenhagen, London and Amsterdam.
tough market conditions
Online brokerage platforms have had a rough time recently. The rising cost of living is making it harder for consumers to come up with the cash they have been flush with during the pandemic.
Freetrade, UK brokerage startup, slashed valuations The company’s crowdfunding surged 65% to £225m last month, citing “different market conditions”.
Public doesn’t face the same problems that many retail brokerage apps face, which have faced a funding crunch due to rising interest rates, Abraham said.
“We have a very healthy cash balance,” Abraham said. “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. The company has raised $300 million in funding from investors including Accel, Greycroft and Tiger Global. The company was last valued at $1.2 billion and enjoys the coveted “unicorn” status.
Abraham said higher rates actually benefit the public to some extent, as it earns yield on cash customer deposits and sees higher interest rates on other assets such as U.S. Treasuries.
Can the public succeed where others have failed?
The public wants to avoid the fate of its US counterpart Robinhood. In 2020, the UK business was abandoned to give priority to the domestic market. Abraham said he was sure that would not happen in the case of the public.
“We don’t have to reinvent our business model to go into new markets,” he told CNBC.
“It’s not like — take the other extreme — like a last-mile delivery company where you have to have a huge footprint now,” Abraham added. “We can actually expand into other markets with a fairly lean team.”
However, Robinhood does have plans to re-enter the UK — following its acquisition of cryptocurrency trading app Ziglu last year, it will launch in the country in the near future.
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