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Revolut has agreed to streamline its ownership structure with its largest investor SoftBank, resolving an obstacle to obtaining a crucial banking license in the UK.
Revolut and SoftBank have been engaged in negotiations, codenamed “Project Swan,” for several months. SoftBank demanded significant compensation for relinquishing its priority class of shares.
The Bank of England has made it a requirement for Revolut to collapse its six classes of shares in order to be granted a UK banking license. This is a condition that Revolut has been attempting to fulfill for over two and a half years. The approval of the banking license rests with the BoE’s regulatory arm, with final authorization from the Financial Conduct Authority.
The preliminary agreement reached last week does not involve the issuance of additional shares to SoftBank, nor does it have any financial consequences for the company.
In initial negotiations, SoftBank demanded twice the amount of common stock in exchange for giving up some of its preferential rights obtained through a recent funding round. However, the final agreement does not reflect these demands.
Revolut did not provide immediate comment, while SoftBank, the BoE, and the FCA declined to comment.
Other investors, including Tiger Global Management, TCV, Balderton Capital, and Ribbit Capital, have either agreed to consolidate their shares into a single class or are in final discussions to do so.
SoftBank’s Vision Fund 2 led an $800mn fundraising round in July 2021, valuing Revolut at $33bn. This valuation was further boosted by $8bn after a meeting between Revolut co-founder Nik Storonsky and SoftBank chief Masayoshi Son. Storonsky had personally appealed to Son to resolve the deadlock and stressed the importance of obtaining a banking license.
Revolut currently holds a full EU banking license in Lithuania but considers the UK to be its primary market. The company believes that obtaining a banking license from a major national regulator will help facilitate its expansion in the US, Australia, and Singapore.
While the resolution of Revolut’s share structure is a positive development in its licensing efforts, there are still other challenges to overcome. The company has faced criticism for its failure to produce clean and timely financial accounts, which has caused friction with the BoE’s Prudential Regulation Authority and the FCA. Revolut has also been in talks with the FCA regarding system failures that allegedly allowed suspicious transactions to occur.
The picture caption on this story has been corrected to make clear Nik Storonsky is co-founder of Revolut.
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