Bolt, the one-click checkout startup, has made headlines in the fintech industry with its leaked term sheet revealing its plan to raise $200 million in equity and an additional $250 million in “marketing credits.” This unexpected move has sparked curiosity and skepticism among industry experts.
The proposed deal includes a controversial pay-to-play cramdown provision, which would require existing investors to contribute more funds or risk losing their stakes to a 1 cent per share buyout. Many in the industry have expressed doubts about the feasibility and fairness of this provision.
Investor Brad Pamnani, who is leading the $200 million equity investment deal, has given shareholders until the end of next week to indicate their intention to participate in the funding round. This has created a sense of urgency and uncertainty among investors.
Initially, Bolt was rumored to be close to raising $450 million at a $14 billion valuation. However, as more details emerged, it became clear that the situation was more complex than initially reported. Bolt’s controversial history, including allegations of misleading investors and violating security laws, has raised concerns about the company’s credibility and stability.
Contrary to initial reports, Silverbear Capital is not leading the investment in Bolt. Brad Pamnani clarified that the investment vehicle is a special purpose vehicle (SPV) managed by a new UAE-based private equity fund. This clarification has cleared up confusion surrounding Silverbear Capital’s involvement in the deal.
Ashesh Shah of The London Fund has also shed light on the additional $250 million investment he plans to make in Bolt. Instead of cash, Shah is offering “marketing credits” in the form of influencer marketing provided by his funds’ limited partners. This unique approach to investment highlights the growing influence of influencers and media in the fintech industry.
The leaked term sheet also revealed Bolt’s financials, with an annualized run rate of $28 million in revenue and $7 million in gross profit as of March. These numbers raise questions about the proposed $14 billion valuation, as it would be an enormous multiple in the market. Brad Pamnani expressed his hope for a valuation closer to $9 billion or $10 billion, but it remains to be seen what valuation will be agreed upon.
Another significant aspect of the deal is the reinstatement of founder Ryan Breslow as CEO. The term sheet includes a $2 million bonus for Breslow, along with $1 million in back pay. This decision has sparked debate within the industry, as Breslow’s previous tenure as CEO was marred by controversy and legal battles.
One of the most contentious provisions in the deal is the pay-to-pay or cramdown provision, which requires existing shareholders to buy additional stakes at higher rates or risk having their shares bought back for a penny apiece. Legal experts have weighed in on the legality and enforceability of this provision, with some suggesting that Bolt may face challenges in implementing it without the approval of preferred stockholders.
Overall, Bolt’s proposed funding round has generated a mix of excitement, skepticism, and controversy within the fintech industry. The outcome of this deal remains uncertain, and it is likely that negotiations and legal discussions will continue before a final agreement is reached.
