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Ex-Merrill Banker’s Trading App Valued at Over $5 Billion

·3 min read

(Bloomberg) -- Broker app Trade Republic Bank GmbH, founded by former Merrill Lynch banker Christian Hecker, has become one of Germany’s biggest fintech firms by valuation.

The Berlin-based company finished a $900 million financing round with investors including Sequoia, TCV, Thrive Capital, and Peter Thiel’s Founders Fund, it said in a statement on Thursday. The round valued Trade Republic at more than $5 billion.

Trade Republic lets customers trade stocks, ETFs, crypto currencies and other financial products on its app, mostly without order commissions or other fees. It was founded in Germany in 2015 and has recently expanded into Austria and France. Hecker told Bloomberg earlier this month the company is looking to offer its services all over Europe.

Today’s funding round followed a 62-million-euro ($75.5 million) round last year that had already turned Trade Republic into one of the highest valued startups in Germany, next to smartphone bank N26.

Late last year, N26 was considering a fresh fundraising at a valuation above $3.5 billion, while early this year Berlin-based banking platform provider Mambu raised 110 million euros at a 1.7 billion euros ($2.1 billion) valuation.

The funding is also a glimmer of success for Germany’s fintech industry, after the high-profile collapse of payment firm Wirecard.

“We expect the company to break even in 2022 and achieve strong margin growth thereafter,” said Marius Fuhrberg, analyst at German financial services firm M.M. Warburg.

Brokerage houses from Germany, U.K., France and Denmark reported a surge in retail trading during the pandemic. However, startups such as U.S. rival platform Robinhood Markets Inc., which is planning to reveal filings for its initial public offering, have seen order volumes surge thanks to their low-cost model.

Traditional brokers finance themselves through fees and rebates from trading venues. New challengers, like Trade Republic and Robinhood, receive revenue from “payment for order flow,” a system where market makers like Citadel Securities pay retail brokers for routing orders to them.

“Don’t really box this company into one of those ready for an exit, it is a very young company that has a lot to do before thinking about anything,” said Luca Bocchio, a partner at Accel who sits on Trade Republic’s board. He added that he expects Trade Republic to focus on growth over profitability. “In a way monetization, it is not yet the most important variable I would consider,” he added.

According to Hecker, 31, who previously worked within the investment banking unit at Merrill Lynch, the rebates alone are enough for Trade Republic to be able to earn money. Trade Republic declined to comment on their revenue. Robinhood received about $331 million in the first quarter from payments for order flow, up from $91 million a year ago.

”We are currently consciously accepting losses in order to be able to grow quickly,” Hecker said in an interview.

(Updated with additional context. Quote from Accel.)

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