The Public.com platform allows users to purchase or sell from over 5,000 stocks. It launched in the UK on July 14.
public.com
American start-up brokerage Public launched its services in the UK on Thursday, starting its first international expansion in 2017.
Backed by celebrities including Will Smith and skateboarding legend Tony Hawk, the app will offer UK users commission-free trading over 5,000 US-listed stocks during normal domestic trading hours.
The general public hopes to expand its offering in the UK over time to incorporate other asset classes already available in the US, comparable to ETFs, US government bonds and crypto-assets. The corporate also plans to launch an “investment plan” tool in the future that may allow users to give you custom recurring investments.
Public’s UK debut will compete with a variety of well-established digital brokerage firms comparable to AJ Bell and Hargreaves Lansdown, which generate income from commissions and management fees, and newcomers comparable to Revolut, Freetrade and eToro, where revenue comes mainly from subscriptions and other fees.
It’s a really crowded market – but Leif Abraham, co-CEO of Public, touted the company’s lower currency exchange fees as one element separating it from the UK package
“Most of our competitors in the UK will charge currency conversion fees on each transaction,” Abraham told CNBC. “We only do that with money deposited and our fees will likely be much lower than most of our competitors.”
It’ll publicly charge 30 basis points, or 0.3%, on each deposit to convert British Kilos to US Dollars.
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The corporate has European roots and was founded in September 2019 by Jannick Malling and Abraham, respectively from Denmark and Germany, who currently function co-CEOs.
The platform, which allows people to construct portfolios and invest in stocks and cryptocurrencies, hit over 1 million users in 2021.
The corporate has benefited greatly from the GameStop saga of early 2021, which saw the share price of the US gaming retailer and other major-shortage firms skyrocket due to hype from the investor community website.
This era shed light on the controversial practice of “Payment for Order Flow” (PFOF), whereby brokers are paid by market makers comparable to Citadel Securities to route client orders to the company.
In 2021, Public removed PFOF from its platform, fearing that it was leading customers into unhealthy trading habits. It also added “safety labels” to some stocks to tell users when certain firms face increased bouts of volatility or risk of bankruptcy.
PFOF is already banned in the UK, while the European Union plans to introduce its own ban on the practice.
Public went the route of partnership with an already regulated company to offer its services in the UK, fairly than applying for its own license. “A lot of fintechs have come this manner,” Dann Bibas, the company’s head of international affairs, told CNBC.
Public will operate in the UK as an appointed agent of Khepri Advisers Limited which is permitted and controlled by the Financial Conduct Authority.
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Bibas said that for now the UK is the only country the public is focusing on for its international expansion. Going forward, it hopes to learn from its UK launch to open up in other European markets. Public has offices in Recent York, Copenhagen, London and Amsterdam.
Difficult market conditions
Online brokerage platforms have been going through a troublesome time recently. The rising cost of living has made it harder for consumers to part with the money they’d during the Covid-19 era.
Freetrade, a British brokerage startup, lowered the valuation up 65% last month to £225m in a crowdfunding round, citing a “different market environment”.
Abraham said Public didn’t face the same problems faced by many retail brokerage apps left in the wake of the financial crisis attributable to rising rates of interest.
“We have now a really healthy money balance,” said Abraham. “That is why we will do things like expand into the UK, the US and so on.”
He said the public saw no reason to boost money at this stage. It has already raised $300 million from investors including Accel, Greycroft and Tiger Global. The corporate was recently valued at $1.2 billion, giving it coveted “unicorn” status.
Abraham said higher rates of interest have actually benefited the public to some extent, because it brings in profits from customer money deposits and is seeing a rise in interest in other assets comparable to US Treasuries.
Can Public succeed where others have failed?
The audience hopes to avoid the fate of its American peer Robinhood, which discontinued its UK operations in 2020 to prioritize the domestic market. Abraham said he’s confident that won’t be the case with Publica.
“We haven’t got to reinvent our business model to enter a recent market,” he told CNBC.
“It isn’t like – taking the other extreme – like a final mile courier company where you now need to have an enormous footprint,” added Abraham. “We will actually expand into other markets with a reasonably lean team that’s accountable for that.”
Robinhood, nevertheless, has plans to return to the UK. The corporate originally planned to enter business by acquiring cryptocurrency trading app Ziglu last yr, but abandoned the deal in the fourth quarter and booked a $12 million impairment charge.
Speaking about the company’s fourth-quarter results, Robinhood co-CEO Vlad Tenev said the goal is to launch brokerage services in the UK by the end of 2023.