Revolut: US investor tried to scoop up cheap shares with Budget tax warning

A US private equity firm tried to leverage fears of a capital gains tax raid in the Budget as it sought to grow its Revolut stake at a heavy discount, City AM can reveal, in a move foiled by the City regulator. 

Jamba Europe, controlled by New York-based HOF Capital, advertised a secondary offer to nearly 3,500 investors in the British banking app earlier this month via the Republic private share trading platform.

The offer was scuppered by the Financial Conduct Authority (FCA) over concerns it could be seen as a “financial promotion”, which would need specific regulatory approval, City AM understands.

Republic, formerly known as Seedrs, said it had cancelled Jamba’s offer for the time being but did not agree with the FCA’s ruling.

Jamba solicited offers through Republic with an 18 October deadline and had planned to close the transactions before 29 October, according to a letter sent to Revolut shareholders and seen by City AM.

The letter noted that this date would be “prior to the announcement of the UK Budget (which is rumoured to include a rise in capital gains tax) on the 30th”.

Chancellor Rachel Reeves is widely expected to raise capital gains tax in Labour’s maiden Budget on Wednesday as she tries to plug an alleged £22bn “black hole” in the public finances. The tax applies to the sale of investments, including company shares.

Jamba’s offer was envisioned as a reverse price auction, meaning shareholders could decide how much they wanted to offer their shares for. Jamba would then have started buying shares from the lowest price upwards.

The letter said Jamba had informed Republic that it considered £407.86 per Revolut share a “reasonable reflection of the current market price”, in line with the weighted average price seen in the last two rounds of trading on the platform.

But that would mark a roughly 38 per cent discount compared to an August employee share sale that landed Revolut a $45bn valuation and cemented the London-based firm’s status as Europe’s most valuable fintech.

The August sale, brokered by Morgan Stanley, is understood to have been launched at a price of $865.42 per share. It saw investors including Coatue, D1 Capital Partners and Tiger Global buy shares from Revolut’s staff.

“It is our understanding that there were a number of factors in that sale indicating that the price may be well in excess of general market demand,” the letter to shareholders said.

It added that if Jamba could achieve a weighted average price below £407.86, the investor would be ready to buy “a substantial proportion” of shares. The exact number it was targeting is unknown.

One Revolut shareholder told City AM that investors using Republic were “very angry” at the “cheeky and opportunistic” offer.

Revolut and the FCA declined to comment. Republic did not respond to a request for comment on the shareholder’s criticism. HOF Capital was approached for comment.

A source close to Revolut said there is no valid secondary market for Revolut shares, given secondary sales are only permitted by the firm’s articles of association in limited circumstances.

Republic said in the letter that it had permitted Jamba to make an offer as it was an existing Revolut investor, adding it had blocked previous proposals from non-shareholders.

Revolut was founded in 2015 as a digital payments and money transfer app in the UK before expanding globally and offering a range of services, from cryptocurrency trading to an eSIM plan.

It booked a record pretax profit of £438m in 2023 and surpassed 10m UK retail customers last month. The firm expects to hit 50m global users by the end of this year.

Revolut’s ambitions in its home market received a boost in July when it secured a UK banking licence, subject to temporary restrictions, after more than three years in regulatory limbo.

The firm is also looking ahead to the possibility of a public listing, reportedly favouring the Nasdaq in New York rather than the London Stock Exchange.

The Sunday Times previously reported the FCA’s ruling.