Revolut and its largest investor SoftBank have agreed to simplify their ownership structure. This removes one of the obstacles that Revolut faced in gaining a long-awaited banking license on its home market.
Revolutand Japanese investor were locked in months-long negotiations – internally codenamed “Project Swan” – with SoftBank demanding a stiff compensation for giving its priority class shares.
Bank of England made the collapse of Revolut’s six classes of share – the legacy of several funding rounds since its founding in 2015 – a condition of granting Revolut a UK Banking Licence, for which it first applied more than two and a half years ago. The Bank of England’s regulatory branch is responsible for the approval of banking license applications. These must be approved by the Financial Conduct Authority.
People familiar with the situation have confirmed that the agreement in principle reached last week will not result in any new “top-up shares” for SoftBank nor a financial impact to the company.
SoftBank demanded up to twice as much common stock as it had originally requested in exchange for giving back some of the preferred rights that were granted for Revolut’s leading of a fundraising round for 2021, which made Revolut UK’s largest private tech company.
SoftBank, BoE and FCA declined comment.
Revolut has not responded to our requests for comment.
One person familiar with negotiations said that other investors, including Tiger Global Management and venture capital firms TCV, Balderton Capital, and Ribbit Capital, have either agreed or are finalizing the transfer of their shares to a single class.
Four investors failed to respond immediately to requests for comment.
SoftBank’s Vision Fund 2, which raised $800mn in July 2021, valued the fintech at $33bn. This valuation was boosted by $8bn following a meeting with SoftBank CEO Masayoshi son and Revolut’s cofounder Nik Storonsky.
Storonsky made a direct appeal to Son to end the deadlock six months ago, arguing that Revolut needed a license to justify and grow their lofty valuation. The payments group is unable to offer its full range of lending services or offer the deposit insurance scheme of the UK without a license.
Revolut holds a full EU Banking licence in Lithuania, but its largest market is the UK. The company’s executives believe that the license approval by a major national regulatory body will give them the legitimacy they need to expand into the US, Australia and Singapore.
Storonsky’s struggle to obtain a license is not helped by the solution of Revolut’s multi-tiered share structure.
Revolut has failed to provide clean and timely financial statements for its main corporate entity. This is a point of contention between the FCA and the Prudential Regulation Authority at the BoE.
Revolut acknowledged last month that their 2022 accounts will also be delayed.
Two people with knowledge of the situation have confirmed that regulators reprimanded fintech for their actions. The company now assures them that they will be finalised without qualification and submitted, these people said.
Revolut’s systems are also under scrutiny. The company has been in discussions with the FCA which regulates the payment business of the company, regarding failures that allowed up to £1.7mn from accounts flagged by the UK National Crime Agency as suspicious.