Revolut, the London-based digital bank, was valued at $33 billion during its last funding round in July 2021.
However, recent reports suggest that the bank’s valuation has almost halved to $18 billion.
This slump has raised questions about the credibility of such high valuations, especially for fintech companies that have yet to turn a profit.
Schroders Nearly Halves Revolut’s Valuation
On April 25th, 2023, Schroders Investment Management announced that it had marked down the value of its investment in Revolut by almost 50%.
The asset manager stated that the revised valuation was based on a more cautious outlook for the digital bank’s growth and profitability.
Revolut’s Financial Performance
Revolut has been expanding rapidly, with the company reporting over 16 million users worldwide in 2021.
The company has also launched several new products and services, such as stock trading, cryptocurrency exchange, and insurance.
However, despite this growth, the company has yet to turn a profit, with losses increasing to £280 million in 2020.
The Risks of High Valuations
High valuations can bring significant risks for investors, especially when they are not backed by a company’s financial performance.
Fintech companies, in particular, face additional risks due to the highly competitive and rapidly evolving nature of the industry.
The recent slump in Revolut’s valuation is a reminder of these risks and the need for investors to carefully evaluate the financial performance and growth prospects of fintech companies before investing.
The Bottom Line
The recent slump in Revolut’s valuation highlights the risks of high valuations for fintech companies that have yet to turn a profit.
While Revolut has been expanding rapidly, the company’s financial performance has not kept pace, with losses increasing in 2020.
Investors need to be cautious about investing in fintech companies with high valuations, especially in a rapidly evolving and competitive industry like digital banking.
