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Public.com app displayed on a smartphone.
Gabe Jones | bloomberg | Getty Images
US stockbroking startup Public launched its 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 trading in more than 5,000 US-listed shares during normal trading hours in the country.
Public hopes to expand its UK offering over time to other asset classes already available in the US, such as ETFs, US government bonds, and cryptocurrency pools. The company also plans to launch an “Investment Plans” tool in the future that will allow users to put up customized recurring investments.
The debut to the public in the UK will see it compete with a host of well-established digital brokerages such as AJ Bell and Hargreaves Lansdown, which make money on commission fees and management fees, as well as startups such as Revolut, Freetrade and eToro, where revenue mainly comes from subscriptions. and other fees.
It’s a fiercely crowded market – but Public’s co-CEO Leif Abraham touted the company’s low foreign exchange fees as one element that separates it from the pack in the UK
“Most of our competitors in the UK will charge a currency conversion fee on every single trade,” Abraham told CNBC in an interview. “We only do this with the money deposited, and our fees will be significantly lower than most of our competitors.”
The public will charge 30 basis points, or 0.3%, on every deposit to convert GBP to US dollars.
The company has European roots, having been founded in September 2019 by Janik Malling and Abraham, from Denmark and Germany, respectively, who are now co-CEOs.
The platform, which allows people to create portfolios and invest in stocks and cryptocurrencies, reached more than 1 million users in 2021.
It benefited greatly from the GameStop saga in early 2021, which saw the stock price of the US gaming retailer and other heavily shorted companies soar on the back of an uproar from the online investor community.
This period highlighted the controversial practice of “pay-for-order-flow” (PFOF), in which brokerages are paid by market makers such as Citadel Securities to route client orders to the firm.
In 2021, Public removed PFOF from its platform, fearing it was driving clients into unhealthy trading habits. It has also added “safety labels” to some stocks to notify users when certain companies are facing spiraling bouts of volatility or risk of bankruptcy.
PFOF is already banned in the UK, while the European Union plans to follow suit by banning the practice.
Public has gone the route of partnering with an already regulated company to offer its services in the UK, rather than applying for a license of its own. “A lot of fintech companies have gone down this road,” Dan Bibas, President of International, told CNBC.
Public in the UK will act as the appointed representative for Khepri Advisers Limited, which is authorized and regulated by the Financial Conduct Authority.
For now, Bibas said, the UK is the only country the public is focusing on for its international expansion. In the future, it hopes to build on the lessons learned from its UK launch to open it up in other European markets. The public has offices in New York, Copenhagen, London and Amsterdam.
difficult market conditions
Online brokerage platforms have had a tough time lately. The rising cost of living has made it difficult for consumers to part with the cash they were pouring into during the Covid days.
Freetrade, the emerging British brokerage firm, devalued by a whopping 65% last month to reach £225m in a crowdfunding round, citing a “different market environment”.
Abraham said the public hasn’t faced the same issues as many retail brokerage apps, which have been left facing a financing crunch because of high interest rates.
“We have a very good cash balance,” said Abraham. “And that’s why we can do things like expand into the UK, the US and so on.”
He said the public saw no reason to raise money at this point. It has already raised $300 million from investors including Accel, Greycroft and Tiger Global. The company was last valued at $1.2 billion, giving it the coveted “unicorn” status.
Higher interest rates have already benefited the public to some extent, Abraham said, as it earns returns on customers’ cash deposits and is seeing an increase in interest in other assets such as US Treasurys.
Can the public succeed where others have failed?
The public hopes to avoid the fate of its US peers Robinhood, which It gave up its UK operations in 2020 to prioritize its home market. Abraham said he’s convinced that won’t happen in Public’s case.
“We don’t have to reinvent our business model in order to enter a new market,” he told CNBC.
“It’s not like — taking the other end — like a last-mile delivery company where you now have to have a massive footprint,” Abraham added. “We can actually expand into other markets with a relatively light team in charge of that.”
Robinhood has plans to re-enter the UK — set to launch in the country sometime in the near future following its acquisition of cryptocurrency trading app Ziglu last year.
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