Revolut in shareholder battle with SoftBank as UK license talks stall

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Revolut is embroiled in a scuffle with major shareholder SoftBank after regulators told the UK’s largest privately held tech firm it must streamline its ownership to secure a long-delayed banking licence.

The Japanese investor has sought compensation for giving up its priority class of shares, which the Bank of England made a condition of granting the crucial license, according to five people familiar with the situation.

Revolut needs the license to expand into the UK, US, Australia and Singapore. Without it, the payment pool cannot lend to or benefit from the UK deposit insurance scheme.

The escalating confrontation between Revolut, SoftBank and UK regulators threatens to turn political as the government fears London will lose its status as Europe’s leading financial services hub following Brexit.

UK Business Secretary Kemi Badenoch has arranged a meeting next week with Revolut’s top leadership, including founder Nik Storonsky, amid fears the company could move its headquarters, two people familiar with the company said. question.

Storonsky has expressed frustration with the two-and-a-half-year wait for his banking licence, criticizing the UK’s “extremely bureaucratic regulator” in an interview. He also took aim at the London Stock Exchange, telling the Times it “is much less liquid, so I don’t see the reason” for listing in London.

Enforcement is already complicated by the fact that Revolut doesn’t receive a clean bill of health from its auditors for its 2021 accounts.

Mayor BDO in March warned was unable to fully verify £477m of revenue reported for the year 2021, including foreign exchange and cryptocurrencies.

The Bank of England’s Prudential Regulation Authority later warned the government it was prepared to reject the application, before resuming negotiations with Revolut, the people said. From March, Revolut has lost both the CEO of the British banks and the chief financial officer of the group.

The fintech is now racing to release its 2022 accounts as early as next month, which it hopes will be approved by its auditors after it builds new systems to better document trades and money flows around the app, they said.

Revolut is separately rushing to reach an agreement with SoftBank, appealing to the founder of the Japanese group Masa Son to break the deadlock. In July 2021, SoftBank’s Vision Fund 2 brought in $800 million series E fundraising the one appreciated Revolution at 33 billion dollarsa valuation raised by $8 billion after a meeting between Son and Storonsky.

The PRA told Revolut it had to merge its six share classes into one, according to people familiar with the matter. The facility is a legacy of the start-up’s multiple funding rounds since it was founded in 2015.

But while most investors had agreed to swap their shares for common stock, SoftBank had asked for double the amount of common stock that Revolut is offering in exchange for giving up some of the preferential rights attached to its current share class, they said. people.

The PRA is also calling on Revolut to expand its board of directors group-wide and add more technology expertise.

Revolut declined to comment on its question or shareholder discussions. The PRA and SoftBank also declined to comment.

Revolut has 30 million customers worldwide and made over £850 million in revenue in 2022. Around 20% was made in the UK from around 6 million customers.

Fintech has been criticized for its harsh charging culture resulting in high staff turnover. It was the subject of a 2021 investigation by the Financial Conduct Authority. Its risk management and compliance systems were reviewed in 2020.

Additional reporting by Akila Quinio