On Thursday, Public, a U.S. brokerage startup, will be launching its platform in the U.K., granting British users the chance to invest in 5,000 American-listed stocks and ETFs. This launch will pit the firm against well-established digital brokerage platforms, as well as newer services like Revolut and Freetrade.
On Thursday, American stock brokerage startup Public expanded into the U.K., its first international venture since its 2017 launch. The app, endorsed by celebrities such as Will Smith and Tony Hawk, will offer U.K. visitors commission-free trading in greater than 5,000 U.S.-listed stocks during regular trading hours. Ultimately, Public aims to widen its U.K. selection to embrace other U.S. asset classes such as ETFs, U.S. govt bonds, and cryptoassets. The company also plans to introduce a "investment plans" feature in the future, which will enable users to arrange recurring investments.This entrance of Public into the U.K.market puts them in competition with a number of existing digital brokerage firms such as AJ Bell and Hargreaves Lansdown, which make money from commission charges and management fees, as well as newbies like Revolut, Freetrade and eToro, whose revenue chiefly comes from subscriptions and other fees. According to Public's co-CEO Leif Abraham, a distinguishing factor of the company in the crowded U.K. market is its lower foreign exchange fees. Abraham told CNBC that while most of their competitors will charge currency conversion fees on each trade, Public only does so on deposits, with fees being drastically lower than most other firms at 30 basis points, or 0.3%.
The firm has its roots in Europe, with Jannick Malling from Denmark and Abraham from Germany having cofounded it in September of 2019, and currently both serving as co-CEOs. It hit the milestone of 1 million users in 2021, and had gained significant benefit from the GameStop saga of the same year in which a group of small-time online investors caused the U.S. game company's share prices to surge. This period spotlighted the controversial "Payment for Order Flow" (PFOF) practice, where brokerages are paid by market makers to route customer orders to their firm. In response to this, Public removed PFOF from its platform, concerned it could drive customers to day trading, and also added cautionary labels to certain stocks to alert users to the heightened risk of volatility or bankruptcy. The EU is currently planning to follow the UK's ban of PFOF, and Public itself has opted to partner with an already regulated firm, Khepri Advisers Limited, that is authorized by the FCA rather than apply for its own license. As Dann Bibas, the company's head of international, has said, "A ton of fintechs have gone through this route".
Bibas affirmed that at present, Public is solely concentrating on widening its international reach to the U.K. It plans to utilize what it has gathered from its U.K. introduction and apply it to other European territories later on. Public has offices situated in New York, Copenhagen, London, and Amsterdam.
The recent challenges to online brokerage platforms have been reflected in Freetrade's 65% reduction in valuation to £225m, as investors adjust to the new economic environment. Public, on the other hand, appears largely unaffected; they boast a "healthy cash balance," are expanding their business across continents, and have raised a total of $300 million from investors. The company is currently valued at $1.2 billion, thereby maintaining its "unicorn" status. In addition, Public has been buoyed by higher interest rates, earning yields from deposits made by customers and seeing an uptick in interest in U.S. Treasurys.
Public is endeavoring to evade the same destiny as its U.S. counterpart Robinhood, which gave up its U.K. venture in 2020 to focus on its home market. Abraham vowed that this won't occur with Public. "We don't have to rethink our business model in order to enter a new market," he notified CNBC. "It's not like the other end – like the last-mile delivery company, that needs a sizable presence," Abraham continued. "We can actually grow in other markets with a reasonably slim team that's responsible for it."Nevertheless, Robinhood has proposed to get back to the U.K. – it has an agenda to launch in the country at a certain point in the near future after its procurement of cryptocurrency trading app Ziglu last year.
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