Investment bank Schroders recently revealed that it has slashed the valuation of its shareholding in digital bank Revolut by nearly half after the Fintech company had been criticized for trying to downplay potentially serious red flags from auditors BDO regarding its revenue statement.
As noted in a recent regulatory filing, the Schroders Capital Global Innovation Trust devalued its investment in the banking platform by about 46%. Schroders had reportedly invested at the market peak in Revolut’s massive $800 million Series E round back in 2021.
The Trust stated that the value of its stake on 31 December 2022 was around £5.4 million, compared with £10.1 million on 31 December 2021.
This suggests a similar reduction in the bank’s valuation from $33 billion to approximately $17.7 billion.
Schroders pointed out that it has been acting “with caution given the challenging market backdrop.”
Schroders’ update comes around six weeks after Revolut had filed its financial accounts, turning in its first annual profit after increasing its overall revenues almost threefold back in 2021.
The accounts had been signed off by the firm’s auditor, BDO; however, there were several key caveats.
BDO cited concerns that it may not verify £477 million worth of revenue nor account for their “completeness or occurrence” because of the setup of Revolut’s internal IT systems. The risk of material misstatements has been said to be most acute for the firm’s foreign exchange, wealth, and crypto-related division.
Revolut was also criticized by its shareholders and board members for apparently glossing over the BDO statement in its published accounts.
A representative for Revolut stated that the inadequacies referred to by BDO had reportedly been addressed in 2021 and that there weren’t any new concerns related to the revenue statement.
It’s worth noting that Revolut isn’t the only Fintech company in Schroders’ portfolio that is facing a considerable downgrade. This as the Innovation Trust has also marked down its holding in UK’s Atom Bank by over 30%.