Revolut shares will be on sale to existing shareholders
Revolut shares are to be on sale to raise additional funds. The UK-based fintech company has announced the sale of US$500 million worth of securities. Banking giant Morgan Stanley has been the advisor on the process.
As noted in the company, it will not resort to an additional issue of shares. The process is the sale of securities to existing owners. Initially, the shares will be on offer to the company’s employees.
Revolut’s analysts believe that this way of raising funds will increase the company’s capitalisation:
1. According to their estimates, it should reach US$40 billion.
2. This is more than 20% higher than the previous figure.
3. In 2021, the company’s capitalisation increased to US$33 billion thanks to the funding round.
Experts believe that if Revolut reaches a valuation of US$40 billion, it will surpass some competitors, including NatWest in the UK and Société Générale in France. It could also catch up with Lloyds Banking Group.
Challenges for the sector
Analysts are cautious in their forecasts for the fundraising process. For the past two years, the European market has been in a downturn, reflected in the fintech sector. In 2022, startup Klarna conducted another financing round. However, the results were disastrous for the company. The company’s valuation dropped from US$46 billion to less than US$7 billion. This affected the sentiment of the entire sector and venture capitalists. As a result, the latter reduced their stakes in some companies, including Revolut.
There are other factors to consider when making a business forecast. Revolut has applied for a banking licence. Moreover, this is not the first application—the company submitted an application about three years ago. It is worth noting that a banking licence is one of the most important components for fintech. It allows them to significantly increase business profits by expanding lending.
British regulators are in no hurry to grant Revolut the necessary permissions. The reason for the long consideration is the unstable situation of the company. The audit revealed some problems, including:
– the company could not confirm its sources of income for 2021;
– the financial report for 2022 shows business losses as a result of the downturn in the crypto market;
– the company has increased expenses that have not been offset by deposit growth.
That said, Revolut said it expects profits to rise to £1.7bn in the current financial year. In the previous report, the figure was £923m.
