Bolt's Audacious Letter to Investors
The financial technology company told investors that it is raising at a $14 billion valuation. That's hard to believe.
Yesterday Bolt’s preferred shareholders received what at first blush seemed like great news for the troubled fintech company: The firm’s interim CEO Justin Grooms wrote investors, “We are finalizing a $450+ million Series F funding round from UAE- and UK-based investment firms, which will elevate our total valuation to over $14 billion, a considerable leap from our $11 billion valuation during the Series E1 round in 2022. In addition to the investment from these investment firms, Bolt may receive additional amounts from existing Bolt investors who may participate in the Series F funding round.”
The Information ran with the credulous headline this morning “Bolt Near Deal to Raise $450 Million at $14 billion.” (They have since updated the story.)
I’ve got copies of the documents that Bolt is circulating with investors and the deal terms are bewildering. (I’ve included a copy of Bolt’s email to investors. This story is based on that email, private deal documents, and conversations with investors.) Let me say up front that the situation is extremely murky. Even many Bolt investors and their lawyers are struggling to understand the proposed deal.
But I know that a story about Bolt paired with a bonkers proposed deal will make a fascinating story for many of you even if I don’t have all the answers.
You’ll remember Bolt as the story that catapulted into the Silicon Valley zeitgeist with its then CEO Ryan Breslow’s conspiracy theories about Y Combinator and Sequoia Capital.
The company has been through a bunch of twists and turns after raising at an $11 billion valuation. Breslow stepped down as CEO in February 2022.
But the new deal that Bolt sent to investors yesterday would put Breslow back in charge.
The proposed deal comes as Breslow remains embroiled in controversy over a $30 million loan he took from the company. Activant Capital sued Breslow over the loan and then settled, arranging to receive $36.5 million with a much smaller sum going to other shareholders. The settlement required that Breslow pay back the loan and that the company implement some governance changes. BlackRock and Hedosophia, large late stage investors in Bolt, have challenged that settlement.
A source tells me that at the end of March, Bolt’s annualized run-rate was at $28 million in revenue and $7 million in gross profit. Even if a new customer Bolt is telling investors about brought in $7 million more in gross profit, a $14 billion valuation would give the company a 1,000X valuation on gross profit.
Breslow wrote me in a DM this afternoon, “Eric, glad you reached out. It’s been a busy day today as you know. I am happy to speak tomorrow.” I told him I was publishing a story imminently.
The Deal at Hand
First of all, the deal is presented to investors expressly as “pay-to-play.” Bolt says it is granting itself the power to buy out 66.67% of non-participating investors at 1 cent a share. That’s a tough ask for those investors who have no desire to put more money into the company.
Entities called The London Fund and Silverbear Capital appear to be the main investors in the deal. Silverbear, an investment bank, is supposed to invest $200 million while The London Fund will invest $250 million in “marketing capital and dollar credits on INFLUENCE by The London Fund.”
I’d never heard of either investor before today.
The deal calls for The London Fund to set up a $250 million fintech focused domain in partnership with Bolt and a $250 million consumer packaged goods domain in partnership with Breslow’s other company, Love. I don’t know what to make of that.
Once you get into the exhibits things get even wilder:
Breslow, who remains executive chairman, would be coming back as CEO as part of the deal, and receive a $2 million bonus for returning. He also gets an option to sell 10% of his shares, along with an indemnification agreement and the right to purchase conscious.org and fourdayweek.com from the company for $1 at any time. He’d also get a new equity grant that would be “no less than the 90th percentile of CEO equity compensation packages of similar companies in Bolt’s industry with comparable valuations.” And if the company ever hits a $50 billion valuation in a $100 million or greater fundraise, Breslow would receive an additional stock grant of 5% of the issued and outstanding Bolt shares.
Bolt enters into a partnership with Love, Breslow’s other company.
The deal involves Bolt itself investing $10 million into The London Fund at a pre-money valuation of $85 million. The London Fund then would issue Bolt a warrant to purchase up to 50 million TLF common shares at $1 a share so long as Bolt invests $15 million into The London Fund. Breslow would take a board seat at The London Fund along with another Bolt director.
A company full of conflicts would only be getting more of them.
The documents that I’ve seen have signature lines for five people:
Bolt Financial CEO Justin Grooms
Silverbear Capital managing partner Brad Pamnani
CEO of Influence by The London Fund Ashesh Shah
Love.com Inc CEO Ryan Breslow
Then another blank for an unaffiliated Ryan Breslow
Investors were given until 5:45 p.m. PT tomorrow to approve the agreement.
I’m still reporting on this situation and will let you know what else I hear. I definitely think there’s more to this story.
Update: at 6:15p ET on Aug. 20
In another wrinkle, Brad Pamnani who was listed as representing Silverbear on the deal documents I saw, called me after this story ran to say that the investment bank Silverbear is no longer involved in the deal.
Instead, Pamani said, an unnamed Abu Dhabi-based fund is going to invest $200 million in Bolt at the $14 billion valuation with the intention of investing several hundred millions more over the next 12 to 24 months. Pamnani told me he was working to get permission to disclose the name of the investor.