Freedom Holding Expands Its Ecosystems by Adding a Telecom Company to It

Freedom Holding is a well-known brand for investors. Headquartered in Almaty, Kazakhstan, the holding provides investment services throughout the CIS region (and some other markets). The company is listed on an American stock exchange and has a market value of roughly $5.2 billion. Freedom Holding is constantly evolving and several interesting events have occurred just over the last few months. What should we know about Freedom’s business, its outlooks and its performance?

1. Freedom Finance has had its headquarters in Kazakhstan for years and is currently working on its ecosystem. The company used to operate in Russia, but it left the Russian market in 2022. In early 2023, a deal was approved by the Russian regulator and the holding’s brokerage and banking business in Russia was successfully sold. Upon leaving the Russian market, the holding reported losses of $104.2 million. Later, these losses decreased by $12.4 million, according to the company’s financial statements.             

It is worth noting that many Russian clients have kept their trust in Freedom and even moved to Kazakhstan’s jurisdiction, which is quite friendly for investors from Russia. Kazakhstan’s financial infrastructure is open to non-residents. As long as they pass the necessary compliance procedures, they can trade on the international markets. It doesn’t matter whether they are qualified or non-qualified investors. They can all trade with shares of big companies or funds.

2. In Kazakhstan, Freedom Holding is a pioneer of the financial industry and a good example of a socially responsible business. The company is well-known for its high professional standards in terms of brokerage, banking and insurance services (all of them are digitalized). It also supports environmental and social projects such as junior football and chess.

According to estimates by Timur Turlov, founder of the holding, the company has already invested more than $100 million in promising startups in Kazakhstan. For example, Freedom has invested in Choco, the biggest non-bank e-com ecosystem in the country and Arbuz.kz, an online supermarket (in 2022, the startup entered the U.S. market under the brand of Pinemelon). The holding also acquired the PayBox payment system, which later was transformed into Freedom Pay. The company is now planning to create a super app, which is going to combine all its services.

When Freedom acquires startups it doesn’t mean that it wants to make a profit by reselling them. “I know that whenever we buy a stake in a new project, we are going to hold it for years. We are entering the business in order to fully open its potential. I have a big portfolio of projects I invested in personally and those Kazakhstani startups that our company has invested in to create a unique ecosystem. I need to understand who is on a startup’s team, its business idea, its market position and key outlooks. Also, I should know what I can do to facilitate the development of a company. I am not interested in pouring money into a startup to just resell it in a month or two. This is not my story,” Turlov said.

Of course, the principles of the company are as important as the vision of its owner. Turlov, who has been living with his family in Kazakhstan since 2012, obtained the country’s citizenship last year. He is actively investing in different business processes and public initiatives. He has full trust in the country’s future. “We are continuing to cooperate with the world, attract new technologies and best professionals; we are becoming a safe harbor where people can work, raise children and build their future,” he said. Since the beginning of this year, Turlov has served as the president of the Kazakhstan Chess Federation. He doesn’t doubt that Kazakhstan is going to play a crucial role in this sport globally. In spring, the federation conducted the FIDE world championship in Astana and a chess tournament for pupils held in Aktau in the summer. “This is a challenge for me because I had no experience of running a public organization. This is not a business, it operates differently. However, it’s important for me personally to understand whether I can be useful, serve as an effective manager for the chess federation and contribute to the development of this sport,” Turlov highlighted.

3. Despite hard times, Turlov’s holding is showing steady growth. As of today, Freedom Holding operates in 16 countries. According to the latest report for the fiscal year starting on April 1, 2022, and ending on March 31, 2023, the net profit of the company rose by 58%, reaching $205 million or $3.50 per share.

During this period, the holding earned $795.7 million, which is a $105.9 million increase (+15%) compared to $689.8 million of revenue last year. As of March 31, 2023, the number of client accounts reached 370,000.

The company is also actively engaged in the development of its business in the U.S. In 2020, the holding acquired Prime Executions, a brokerage company that facilitates Freedom Holding clients in getting access to IPOs on American stock exchanges. In 2023, Freedom closed the deal on acquiring investment bank Maxim Group and LD Micro, an independent resource in the microcap space in North America.

The activity of Freedom Holding Corp. is regulated by the U.S. Securities and Exchange Commission (SEC), while S&P Global Ratings has rated the company at “B-“. In 2022, the holding started cooperation with its new auditor, one of the Big Four.

4. Freedom Telecom has recently joined the ecosystem of services by Freedom. By now, the brand of Freedom combines the bank, which offers unique solutions such as digital mortgage and digital car loans, the brokerage company, the insurance company, telecom stores, the online service Ticketon and now the telecommunication operator.

“We have decided to dare and find a solution for one of the biggest problems in our country, not just complain about it. We want to give internet access to everyone across the country. This is a new staple product today. We want to make a difference and raise the quality of fixed and mobile internet in Kazakhstan by promoting 5G standards. This is going to have a multiplicative effect on the national economy thanks to a higher level of digitalization of services in the public sector, healthcare system (telemedicine), education, etc.,” Turlov said. As a result, labor efficiency and quality of life would significantly rise. This is a mission of the new company Freedom Telecom, the businessman underlined.

The head of Freedom Holding does not doubt that the development of new channels of traffic will boost demand for digital services which, in turn, would boost the capacity of the wireless communication market. “This is the point. It’s like a deep blue ocean for us, a huge niche for Freedom Telecom,” Turlov said. The company already has nine branch offices nationwide and more than 1,000 corporate clients (b2b).

5. Freedom Holding’s share value on NASDAQ has grown sixfold since the day of its initial listing. At the moment of initial listing in the U.S. in October 2019, the holding’s shares were traded at $14.40. Now, one share is traded at $90. Much of this phenomenal growth was supported by the aforementioned transformation of the company. “‘I control 71% of the holding’s shares, while the remaining stock valued at about one billion dollars is traded in the open market. I think that it’s safe to say that our business, the company proper has changed significantly over the past years and it isn’t the same as it used to be several years ago,” Turlov said.

A bear attack on the company that happened last month apparently had the purpose of pushing down Freedom shares. However, the attack failed and the holding’s stock value rose instead. This case was quite exciting and you can read about it in detail here. To make a long story short: well-known short sellers from Hindenburg Research issued a negative report about FRHC blaming the company for breaching sanctions and turning a blind eye on doubtful clients and transactons.

This “report” was meant to stoke fear in investors of Freedom Holding but failed thanks to an in-depth report by an independent auditor, which was published as part of an annual statement by Freedom. Auditors have thoroughly checked the holding’s compliance procedures during client onboarding and monitoring.

“If we decide to accept a client’s money, we take our time in order to thoroughly check the origin of this money to ensure that they do not belong to sanctioned individuals. And if our financial statement where we revealed all aspects of our business was seen as dubious, we would never obtain such a positive auditor’s report,” the businessman said. Apart from the balance account, the auditors also confirmed that the holding’s clients are real and its tariffs can effectively generate revenue.

As a result, all short positions that the “bears” opened before the Hindenburg’s report went public were closed in a panic because there were none sold out of Freedom’s shares whatsoever. Against the background of closing short positions, the price of the holding’s shares surged more than $100 per share. In other words, the “bear” attack orchestrated by Hindenburg turned into a victory for Freedom. Interestingly, the owner of Freedom Holding is always calm when someone attacks his company or reputation. “We will continue to develop our business,” Turlov usually says in such situations.

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