Revolut in shareholder battle with SoftBank as UK licence talks stall

Revolut is locked in a fight with top shareholder SoftBank after regulators told the UK’s biggest private tech company it must simplify its ownership to win a long-delayed banking licence.

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

Revolut needs the licence to help it expand in the UK, the US, Australia and Singapore. Without it, the payments group cannot lend or benefit from the UK’s deposit insurance scheme.

The escalating clash between Revolut, SoftBank and UK regulators is threatening to turn political as the government fears London losing its status as Europe’s main financial services hub following Brexit.

UK business Secretary Kemi Badenoch has organised a meeting next week with Revolut’s top leadership, including founder Nik Storonsky, amid fears that the company may move its headquarters, two people familiar with the matter said.

Storonsky has voiced frustration at the two-and-a-half year wait for the banking licence, criticising 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 just don’t see the point” in listing in London.

The application is already complicated by Revolut not receiving a clean bill of health from its auditors for its 2021 accounts.

Auditor BDO in March warned it was unable to fully verify £477mn of revenues recorded for the year 2021, including from foreign exchange and crypto.

The Bank of England’s Prudential Regulation Authority subsequently alerted the government it was poised to reject the application, before resuming negotiations with Revolut, the people said. Since March, Revolut lost both its UK banking chief executive and group chief financial officer.

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 built new systems to better document exchanges and flows of money around the app, they said.

Revolut is separately rushing to reach an agreement with SoftBank, appealing to the Japanese group’s founder Masa Son to break the deadlock. In July 2021, SoftBank’s Vision Fund 2 led an $800mn series E fundraising that valued Revolut at $33bn, a valuation boosted by $8bn after a meeting between Son and Storonsky.

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

But while most of the investors had agreed to swap their shares into common stock, SoftBank had demanded twice the amount of common stock Revolut is offering in exchange for giving up some of the preferential rights linked to its current share class, the people said.

The PRA is also requesting that Revolut expand its group level board and add more technology expertise.

Revolut declined to comment on its application or discussions with shareholders. The PRA and SoftBank also declined to comment.

Revolut has 30mn customers around the world and made more than £850mn of revenue in 2022. About 20 per cent of that was made in the UK from about 6mn customers.

The fintech has been criticised for its hard charging culture resulting in high levels of staff turnover. It was subject of a 2021 probe by the Financial Conduct Authority. Its risk management and compliance systems were reviewed in 2020.

Additional reporting by Akila Quinio