Martin Cole
Key Takeaways
– Revolut’s valuation has been reduced by almost half by investment bank Schroders.
– The devaluation is due to concerns raised by auditors BDO over the accuracy of Revolut’s revenue statement.
– Revolut filed its financial accounts, showing its first annual profit.
– BDO raised concerns about the completeness and accuracy of £477 million of revenue.
– Revolut has defended its revenue statement, stating that the issues raised by BDO were resolved in 2021.
– Schroders has also downgraded its investment in Atom Bank by 31%.
Introduction
Revolut, the popular fintech startup known for its digital banking services, has recently faced a significant devaluation of its valuation. Investment bank Schroders, which invested in Revolut during its Series E funding round, has reduced the valuation of its stake in the company by almost half. This devaluation comes as a result of concerns raised by auditors BDO regarding the accuracy of Revolut’s revenue statement. In this article, we will explore the reasons behind this devaluation and the implications it may have for Revolut and the fintech industry as a whole.
The Concerns Raised by BDO
BDO, the auditing firm responsible for reviewing Revolut’s financial accounts, raised concerns about the completeness and accuracy of £477 million of revenue reported by the company. These concerns were primarily related to issues with Revolut’s internal IT systems. BDO questioned the reliability of the revenue figures and expressed doubts about their accuracy. This raised concerns among investors and led to a reevaluation of Revolut’s valuation.
The Impact on Revolut’s Valuation
Schroders, as a major investor in Revolut, took these concerns seriously and decided to reduce the valuation of its stake in the company. This reduction implies a significant decrease in Revolut’s overall valuation, from $33 billion to $17.7 billion. The devaluation reflects the uncertainty surrounding the accuracy of Revolut’s revenue statement and the potential impact it may have on the company’s financial performance.
Revolut’s Defense
Revolut has defended its revenue statement, stating that the issues raised by BDO were resolved in 2021. The company claims to have addressed the concerns and implemented measures to ensure the accuracy and completeness of its financial reporting. Revolut’s management has expressed confidence in the company’s financial position and its ability to deliver sustainable growth in the future.
Implications for Revolut and the Fintech Industry
The devaluation of Revolut’s valuation by Schroders raises questions about the overall health and stability of the fintech industry. Fintech startups like Revolut have gained significant attention and investment in recent years, with high valuations based on their potential for disruption and innovation. However, this devaluation serves as a reminder that even successful fintech companies are not immune to challenges and risks.
Investor Confidence
The devaluation of Revolut’s valuation may impact investor confidence in the company and the broader fintech sector. Investors may become more cautious and skeptical about the accuracy of revenue statements and financial performance reported by fintech startups. This could lead to a more thorough due diligence process and increased scrutiny of financial accounts, potentially affecting future investments in the industry.
Regulatory Scrutiny
The concerns raised by BDO and the subsequent devaluation of Revolut’s valuation may also attract regulatory scrutiny. Regulators may take a closer look at the financial reporting practices of fintech companies and impose stricter regulations to ensure transparency and accuracy. This could have implications for the operations and growth strategies of fintech startups, potentially impacting their ability to attract investment and expand their customer base.
Conclusion
The devaluation of Revolut’s valuation by Schroders highlights the importance of accurate and transparent financial reporting in the fintech industry. The concerns raised by auditors BDO have led to a reevaluation of Revolut’s revenue statement and a significant reduction in its overall valuation. While Revolut has defended its financial position, the devaluation may have implications for investor confidence and regulatory scrutiny in the fintech sector. It serves as a reminder that even successful fintech startups are not immune to challenges and risks, and that accurate financial reporting is crucial for maintaining trust and credibility in the industry.
