A new United Arab Emirates-based investment platform is enticing users with free stock today after securing $1 million in pre-seed funding.
Dubai’s Baraka is inviting new users to join its waitlist ahead of the platform’s full launch in the second quarter of 2021, pending regulatory approval.
The app will provide access to more than 4,000 US-listed securities, with no commission fees on trades and no minimum investment requirements.
It is geared towards encouraging new retail investors take their first steps into the market.
Founder Feras Jalbout spoke to Al Arabiya English about the democratization of investing and how companies like his can avoid some of the pitfalls faced by similar apps such as Robinhood.
Robinhood, an American trading platform with a similar aim of democratizing investing, was recently subject to a US House of Representatives hearing after stopping trades of Gamestop stock as the price was skyrocketing due to a concerted effort by retail traders on the Reddit forum WallStreetBets, purportedly organized as a rebellion of sorts against powerful Wall Street firms. It is also facing dozens of class action lawsuits.
“[Baraka’s] ethos is about empowerment,” said Jalbout. “Whether people want to invest in Gamestop or the 4,000 other securities on our platform, it’s really up to them – but they choose.”
Baraka targets a millennial customer base, offering access to market news and educational tools that Jalbout says will help them make “the right decisions,” while giving them the freedom to explore different investment options.
“One the key takeaways of this generation is that they want ultimate control, and for good reason,” Jalbout said.
“They want to put their money behind companies and causes that are meaningful to them… Ultimately people make their own decisions, but I think the goal is to get people to make the right decisions.”
Online trading has grown massively since the onset of the COVID-19 pandemic, with large numbers of new investors hitting the stock market for the first time. Trading platforms like Robinhood went on to garner a huge amount of attention after the recent Gamestop short squeeze, in which retail traders on Reddit learnt of investment firm Melvin Capital’s intention to short the video game company’s stock – effectively betting the price of the stock would go down – and rallied together to buy and bolster Gamestop’s share price.
“The whole Gamestop phenomenon was a pretty incredible moment for retail investing,” Jalbout said.
“What was clear was that there is this incredible amount of demand for investment products from retail investors … I don’t see that going away, particularly in our part of the world where the demographic is so young and underserved, and so I think it’ll be a very interesting few years for us.”
One of the problems faced by Robinhood was its lack of communication with customers, said Jalbout, adding: “Unfortunately they had to do what they had to do, but I think the problem was that they didn’t communicate properly to their user base.”
Baraka, which has received funding from several venture capital funds and the likes of Dr. Abdulla Elyas, co-founder of Careem, focuses on being an educational tool for its users, as much as a trading platform. It will feature Arabic and English language educational content and quizzes that Jalbout says are designed to teach people about smart investing and raise their confidence before putting money into securities.
Users will be able to trade stocks, Exchange Traded Funds (ETFs) and fractional shares, and the app will include features such as a daily bite-sized market newsletter, and a messaging service.