London-based fintech unicorn Revolut announced that it has reached an agreement with Softbank to streamline its ownership structure to remove a hurdle in obtaining a much-needed banking license in the UK market.
The announcement comes after months of negotiations, known internally as “Project Swan,” during which SoftBank had demanded substantial compensation in exchange for giving up its priority class of shares, report FT.
To secure a UK banking license, a key requirement set by the Bank of England has been the consolidation of Revolut’s six classes of shares, the legacy of multiple funding rounds since it was founded in 2015.
The regulatory arm of the BoE holds authority over banking license approvals, which must also be signed off by the Financial Conduct Authority (FCA).
No additional shares
The agreement, struck last week, does not involve the issuance of additional “top-up” shares to SoftBank nor does it have a financial impact on Revolut, according to the report from FT.
This comes despite SoftBank’s initial demand for a share amount potentially twice as large as common stock in exchange for giving up some of the preferential rights obtained during its leading role in a 2021 fundraising round, which made Revolut the UK’s most valuable private tech firm.
According to FT’s report, Tiger Global Management, TCV, Balderton Capital, and Ribbit Capital are either in the process of transferring their shares into one class or have already agreed to do so.
In July 2021, Revolut raised $800M (approx €677M) in its Series E round of funding led by SoftBank Vision Fund 2 with participation from other investors, including Tiger Global Management.
Without a licence, the payments group cannot offer a full suite of lending services nor offer customers the security of the UK’s deposit insurance scheme.
Revolut’s struggle remains
In 2021, Revolut obtained a full banking licence in Lithuania, but its largest market is still the UK.
According to FT, Revolut believes that obtaining approval for its licence from a major national regulator will give it the legitimacy it needs to expand in the US, Australia, and Singapore.
Although Revolut’s complex multi-tier share structure has been resolved, there are still other obstacles to overcome.
The company’s inability to produce timely and accurate financial accounts for its main corporate entity has been a persistent issue with both the BoE’s Prudential Regulation Authority and the FCA.
The fintech company was forced to issue qualified and late accounts for 2021 and admitted last month that their 2022 accounts would also be delayed.
After regulators’ criticism, Revolut promised to submit its accounts without qualifications.
Read the orginal article: https://siliconcanals.com/news/startups/revolut-strikes-deal-with-softbank/
