The first wave of crowdfunders who backed banking fintech Revolut could receive a payout worth 400 times their initial investment.
Roughly 4000 users of crowdfunding platforms Republic and Crowdcube will have the opportunity to sell their stakes in the company for $865.42 per share, City AM reported earlier this week.
In a letter to investors, Revolut told almost 3,500 Republic (formally Seedrs) users and around 400 Crowdcube users they would be able to cash out in the upcoming share sale coordinated by investment bank Morgan Stanley.
Collectively, they will be in line for up to $9.1 million and $10.2 million, respectively in the partial share sale.
The 433 Crowdcube retail investors were able to purchase shares in the company for $2.14 each in a 2016 crowdfunding round, one year after it was founded.
Together, crowdfunders purchased a 2.39% stake in Revolut, putting in tickets ranging from £100 to a maximum of £5k, with a total maximum collective allocation £1m. That stake is now worth $426m, or more than 40,000% more, after Morgan Stanley valued Revolut at $45 billion.
In 2017 Revolut separately raised £3.8m on Republic, then called Seedrs, with a sale of a 1.36% stake to 4,260 users of the platform at a valuation of £276 million valuation.
The latest Good Money Guide review of Revolut found it was a “good entry-level account for most investors”. It noted, however, that it is far from the safest platform out there, especially for those seeking to transfer large amounts of foreign currency.
The fintech recently revealed its intention to introduce an AI-powered assistant, mortgages, ATMs, and develop its business-to-business offering in 2025.
A big win for crowdfunding
The upcoming share sale should represent a big win for the crowdfunding model, serving as evidence it can produce successful businesses and offer genuine opportunities to investors.
The model is becoming increasingly popular among fintechs, with firms including bond marketplace WiseAlpha and options trading platform Investa raising hundreds of thousands of pounds on Crowdcube in recent months.
Monzo and investment app Moneybox have also recently crowdfunded secondary funding rounds to fuel their expansion plans.
Prospective investors should bear in mind that crowdfunding is a very high-risk strategy, as the large majority of early-stage companies fail.
As the upcoming Revolut share sale shows, the rewards can be huge, but it should not be forgotten the losses from failed investments are usually total.
Robin has more than six years of experience as a financial journalist, most of which were spent at Citywire, and covers the latest developments in the investing, trading and currency transfer space. Outside of work, he enjoys reading literature and philosophy and playing the piano.
You can contact Robin at robin@goodmoneyguide.com
