Just this week, fintech unicorn Revolut announced a secondary share sale at a huge $75 billion valuation.
But what exactly does this mean?
Here, we break down everything that Revolut is doing, including why secondary share sales are becoming a growing trend for high-growth startups and what it means for the future of the company.
Revolut’s Decision: Why It’s Important
Earlier this week, Revolut announced that employees would be able to sell up to 20% of their vested shares to new and existing investors. This is known as a secondary share sale – it’s a way for shareholders (including employees) to turn their equity into cash, without waiting for the company to IPO.
One of the most important things to note about this is that no new shares are being created. Instead, shares that already exist are simply being transferred from employees to new investors at a fixed price of $1,381.06 per share.
This secondary share sale is great for investors that want to buy into the company, and also a huge benefit for employees who want to release some liquidity from long-held shares.
What Is A Secondary Share Sale?
To put it simply, a share sale is when someone who owns shares in a company decides to sell them. Share sales are split into two main types:
Primary share sales: Where a company creates and sells new shares, usually as a way to raise money to grow.
Secondary share sales: When people who have early shares (either investors or employees) sell their own shares to others. The company doesn’t raise any money, it just helps move shares into different hands.
For many early employees at Revolut, a secondary share sale is a great way for them to turn equity into cash after years of hard work.
Why Would Revolut Do This?
For a big company like Revolut, a secondary share sale can be a great way to:
- Help employees release equity, without waiting for an IPO or acquisition.
- Bring new investors onboard without diluting their existing shares (ie, not having to create any new ones)
- Take some pressure off IPO-ing, as staff can cash out now.
What’s The Difference Between A Share Sale And A Buyback?
The difference between a share sale and a buyback is a little confusing, but there are important elements that differentiate them.
A share sale involves one shareholder selling to another. The company is only involved in the admin, it doesn’t buy up any of its own shares.
A buyback is when the company ‘buys back’ its own shares from investors, usually to increase its equity share.
Revolut is currently initiating a share sale, not a buy back.
Why Are Share Sales Good?
Share sales can be good news for a few different stake holders, including:
Employees
Employees benefit from share sales because they are able to release some cash from long-held shares. Especially those that have helped grow the company from the start.
Investors
Existing investors can also release equity if they are happy with their gains. Alternatively, the share sale allows them to buy up more shares, increasing their level of ownership. For new investors, it’s a great chance to get in on the action without needing to wait for an IPO.
The company
The share sale also benefits Revolut because they don’t need to take on the admin associated with a funding round. All they need to do is facilitate the transfer of shares whilst they keep building the company up.
Is Revolut On The Way To An IPO?
Ever since they reached unicorn status, investors have wondered whether Revolut is planning to IPO. Whilst some expected it to take place in 2025, this new share sale might signal that Revolut is pushing it further down the line.
However, Revolut founder Nikolay Storonsky did suggest last December that the company would more likely IPO in New York than London, which is a shame for the London Stock Exchange, which has seen a few companies move away from it.
Revolut Share Sale: What Does The Future Hold?
Revolut’s $75 billion secondary share sale is a big move, not just for the company, but its employees and investors too.
Whilst we will wait to see what Revolut decides regarding its IPO, many of its early employees will certainly be celebrating an extra payday this month.
