According to a recent Financial Times report, the UK fintech giant Revolut is aiming for a valuation exceeding $40 billion in an upcoming share sale, according to insiders. This move would solidify its status as Europe’s most valuable startup. The high rating is somewhat surprising given the fact that the UK regulators have so far refused to grant Revolut the requested banking license. Its competitors, Monzo and Starling, have secured banking licensesw a few years ago already.
Ambitious Valuation Amid Market Challenges
The SoftBank-backed company is working with Morgan Stanley to sell approximately $500 million worth of existing shares, including those held by employees. If successful, this valuation would mark a significant increase of at least 20% from the $33 billion valuation achieved in its 2021 fundraising round. This would place Revolut’s valuation above that of UK lender NatWest and Paris-based Société Générale, aligning it with Lloyds Banking Group.
Achieving this target would be particularly notable given the challenging market conditions European fintech firms have faced over the past two years. For example, Stockholm-based Klarna saw its valuation plummet from $46 billion to $6.7 billion in a 2022 fundraising. Some venture capital investors have also marked down their stakes in Revolut.
Regulatory Hurdles and Financial Performance
Revolut’s growth ambitions are tempered by ongoing regulatory challenges. The company has been waiting for over three years for approval of its UK banking license application. Securing this license is crucial for Revolut to expand its lending operations and profitability in its largest market. However, regulators have delayed approval due to various issues, including auditors’ inability to fully verify revenue figures in its 2021 accounts.
In its latest delayed financial results for 2022, Revolut reported a loss. The decline in cryptocurrency trading, which previously boosted profits, and rising operational costs have offset gains from higher customer deposits and interest rates.
Founded in 2015 by the then-Russian nationals Nik Storonsky and Vlad Yatsenko, Revolut has outpaced UK rivals like Monzo and Starling in customer growth and international expansion. The fintech now boasts about 40 million customers worldwide, with a third based in the UK. In contrast, Monzo and Starling, both regulated as banks, each have fewer than 10 million customers and operate solely in the UK.
Funding and Future Prospects
In 2021, Revolut raised $800 million from investors, including SoftBank’s Vision Fund 2 and Tiger Global Management Management. The company projects revenues to reach £1.7 billion in 2023, up from £923 million the previous year, and expects to achieve a “double-digit net profit margin.”
Backed by investors such as TCV, Balderton Capital, Ribbit Capital, and Molten Ventures, Revolut’s forthcoming share sale and potential valuation milestone will be closely watched as indicators of the fintech sector’s resilience and growth potential in a challenging market environment.
