Revolut Targets Valuation Jump to $45 Billion in Sign of Fintech Revival
The digital banking app provider has begun to churn out profits thanks to user growth and rising interest rates
Bank disrupter Revolut is nearing a deal to sell about $500 million of employee-owned shares at a valuation of $45 billion, according to people familiar with the matter, a sign that animal spirits are returning to the financial-technology sector.
The details
Revolut, already the world’s second most-valuable fintech startup after Stripe, is in talks to sell the shares to new shareholders, including New York-based Coatue Management, and existing investors such as Tiger Global Management.
Revolut, which competes with incumbent banks for retail and business customers, has also been in talks with investment firm Greenoaks as a potential participant. A deal, if completed, could be announced in the coming days and would pave the way for a potential initial public offering.
The stock sale would increase Revolut’s valuation by more than a third. The company was valued at $33 billion in 2021 when it raised $800 million from a group led by Tiger and SoftBank Group’s Vision Fund unit. Japan’s SoftBank isn’t buying shares in the latest offering.
The rationale
Revolut won’t gain fresh funds from the share sale to plow back into its operations. Instead, the effort allows long-term employees to cash out some of their holdings, while setting a floor for the company’s potential valuation ahead of any IPO.
Startup employees are often compensated heavily in shares. Typically, staffers would wait for the company to go public to cash in. The global IPO market, though, has struggled in recent years because of high interest rates and the flops of some high-profile new listings.
The context
Documents provided to investors show that Revolut has begun to churn out profits. It reported $429 million of net income in 2023, and forecasts $976 million of profit in 2024.
Revenue grew to $2.2 billion in 2023 and is projected to hit $3.7 billion in 2024, as businesses and households increasingly migrate to its digital-only finance platform.
Founded in 2015, U.K.-based Revolut operates a banking-like app that lets customers deposit money, make payments, and buy and sell currencies, stocks and crypto. The company, led by co-founder Nik Storonsky, has a European Union banking license, but has struggled to secure one for its largest market, the U.K. It stumbled with its accounting practices, which it has since moved to strengthen to win regulator approval.
The company has been aided by higher interest rates—19% of its revenue came from interest income in the 12 months through March—and a growing roster of users around the world. It reported over 20 million customers actively using the app as of March, up from 9.2 million in early 2022.
A $45 billion valuation is lofty measured against some of its rivals. It is about 17 times the company’s revenue over the 12 months through March. That compares with just over two times for PayPal and almost eight times for Nu Holdings, a Brazilian-based digital bank listed on the New York Stock Exchange.
Revolut’s goals are even loftier. It projects $9.3 billion in annual revenue in 2026 and has a long-term ambition of hitting $100 billion in sales by 2040—which would be over three times as large as PayPal’s 2023 revenue.
The investment comes despite broader struggles in the fintech sector, where valuations have tumbled since interest rates began rising, while profits have proved more elusive than once hoped.