In the middle of Fintech Slump, Bolt’s largest customer files a lawsuit against it and becomes a shareholder

The retail conglomerate Authentic Brands Group, which owns brands such as Reebok and Nine West, dismissed the lawsuit against the payment software supplier Bolt. It also made an unexpected change and became a shareholder in the fintech company, according to an announcement on Wednesday.

When ABG first became a Bolt customer at the end of 2020 and leased the company to operate a cash register for two of its brands, it negotiated the right to buy up to 5% of Bolt for $ 29 million, giving Bolt an implicit valuation of around $ 600 million, according to a court document filed by ABG. When the valuation of fintech startups rose the following year, Bolt reached a staggering $ 11 billion, more than doubling in less than a year and a half.

In March 2022, ABG claimed in a lawsuit that Bolt denied ABG the right to buy shares in Bolt on the previously agreed terms. It also said that Bolt failed to live up to the technology promises it had made. In a proposal to dismiss the lawsuit, Bolt said that the allegations in the complaint were “unlikely” and that ABG had not fulfilled the agreed conditions for buying shares in Bolt.

Since then, the fintech market has faced a sober rebound from high valuations from the pandemic. As the fear of inflation piles up and e-commerce spending declines, investors are putting pressure on companies to show profitability. At the time of writing, listed fintech shares are down 45% so far this year. And in May this year, Bolt joined a wave of layoffs for the entire industry, cutting the workforce by about a third while citing “market conditions” and macroeconomic challenges.

In the new settlement, ABG has dropped the lawsuit and become a shareholder, although both parties refuse to say what valuation ABG paid. It is almost certainly well below the $ 11 billion Bolt reached in January 2022, but it may be above the valuation of around $ 600 million set at the end of 2020. Bloomberg reported that ABG ended up with a stake of less than 5%, but did not have to pay anything for it. Bolt CEO Maju Kuruvilla claims that the company’s “formal valuation” has not changed since the series E financing round, which valued the company at $ 11 billion.

“It would not have been a lawsuit if everything worked as it was treated before, and as you can imagine, neither party would have taken a solution to something that is one-sided,” Kuruvilla said. “The spirit of this is that we managed to find something in between that worked for both sides.”

And what about ABG’s claims that Bolt’s technology is plagued with technical problems? ABG declined to comment, but Kuruvilla says: “As you can see, they continue to use the product so far and they will continue to use it. It is a testament to the product.”