Revolut crowdfunders in line for 400 times return on investment
Some of Revolut’s earliest investors are in line for 400 times returns after taking a punt on a fledgling fintech that has grown into a banking titan.
The British start-up’s early backers, including participants in two crowdfunding rounds, have been offered the chance to sell down their holdings in a secondary share sale.
Brokered by Morgan Stanley, it values Revolut at $45bn and has been extended to more investors after current employees cashed in this summer.
Users of start-up investment platforms Republic Europe and Crowdcube have been allocated a total of $19.3m as part of the sale, which prices their shares at $865.42 each.
While limited in how much they can sell, it marks a rare opportunity for the crowdfunders to realise value from their investment as Revolut is not a publicly-listed company.
A year after it was founded, Revolut offered a 2.39 per cent stake to investors via Crowdcube in 2016. 433 people decided to take the plunge and buy into a company then known merely as a digital payments and money transfer provider in the UK.
The £1m fundraise lent Revolut a £42m pre-money valuation and priced its shares at $2.14 each. They are now worth some 40,000 per cent more, with the 491,870 shares owned by Crowdcube users priced at roughly $426m.
Revolut has amassed more than 50m users globally, including over 10m in the UK, where it received a provisional banking licence in July. The company now offers everything from accounts and international payments to trading and an eSIM plan
Crowdcube’s co-chief executive Matt Cooper told Morning Wire that the platform was “incredibly proud” to offer the liquidity to its users.
“We’re seeing significant value created in the UK economy by companies backed by retail investors when they were still private and early stage, such as Revolut, BrewDog, Monzo and Moneybox,” he said.
Cooper added that the combined value of the 25 largest companies which have raised money through Crowdcube is now double that of the top 25 stocks listed on the London Stock Exchange’s junior AIM market.
“If we’re serious about making the UK an attractive place to build fast-growth businesses, we need to lean harder into the power of retail investors driving our private markets – it’s clearly working,” he said.
A host of other British fintechs have followed in Revolut’s footsteps. In recent months, digital bank Monzo, payments firm GoCardless and wealth manager Moneybox have arranged secondary sales as they look to boost their valuations and free up liquidity while equity capital markets activity remains subdued.
Cooper said Crowdcube has returned more capital to investors through secondary liquidity transactions this year alone than the previous ten years combined.
“The private markets, especially for later-stage secondary transactions, are currently outpacing the public markets,” he added.
Both Republic and Crowdcube operate secondary markets for users to trade company shares among themselves, although Morning Wire previously revealed Revolut’s opposition to larger transactions it does not have control over.
By opening up its ongoing sale, Revolut has staved off potential legal action from Repubic, which last month accused it of moving to block a deal involving a US private equity firm that assumed control of one of its existing shareholders.
The controversial deal marked a 32 per cent discount to the Morgan Stanley sale and has since been cancelled by Republic.
Revolut raised £3.8m on the Republic platform, then known as Seedrs, in 2017. The company sold a 1.36 per cent stake to 4,260 people at a £276m pre-money valuation.
The round priced Revolut’s shares at £8.57 each, with the 436,646 shares owned by Republic users now worth around $378m.
Jeff Lynn, Republic Europe’s chair, told Morning Wire that some of these backers are sitting on returns of nearly 80 times their original investment.
“We have been thrilled to watch Revolut become one of the great British success stories,” Lynn said.
He added that the returns users will now realise “show that while investing in early-stage companies comes with lots of risk, the upside when things go well can be phenomenal”.
Revolut could provide further liquidity to its shareholders through a stock market float, although comments made by co-founder and CEO Nik Storonsky this week suggest the firm is set to snub its home market for a New York listing.
Storonsky, who reportedly sold up to $300m worth of his stake this summer, said it was “not rational” for Revolut to list in London as the US market offers deeper pools of capital and a lower cost of trading.