Market Loop - Revolut undergoes major cost review

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7th September 2022

Bite-sized business news from the UK and beyond

Good morning Any Brit who’s recently travelled to the US will have experienced a particularly expensive trip as the pound has reached a 37 year low versus the dollar. Sterling is trading at around $1.14, a 15% drop since the start of the year and a level not reached since 1985.

The interest rake hikes of the US central bank vs its British counterpart has helped strengthen the dollar making it the second best-performing global asset in August only behind natural gas.

Today's stories

Revolut undergoes major cost review
Porsche plans mega European public market debut

TECH
Revolut undergoes major cost review

What happened?
Banking app Revolut is in the middle of a widescale cost cutting program according to the FT. Codenamed ‘Project Prism’ the company has rescinded on some graduate job offers with only a few days notice in a bid to right size its cost base.

How did we get here?
Last year London-based Revolut raised $800m at a valuation of $33bn making the seven year-old company one of Europe’s most valuable startups. But tech firms have had a torrid 2022 with worsening economic conditions and rising interest rates hammering company valuations in both the private and public markets.

In May ‘buy now pay later’ giant Klarna had its valuation cut from $46bn to $7bn in a funding round and announced a wave of job cuts.

The tech heavy Nasdaq index has seen its value plunge by 25% this year.

Revolut has 20m customers across 36 countries and the UK is its biggest market with nearly 5m accounts. Facing a bleak economic outlook in its home market and abroad, the company is taking action to prepare for what could be a tough few months ahead.

That’s not the only problem Revolut is tackling:
Earlier this week the audit watchdog highlighted issues with Revolut’s audits and is pushing the company to improve its internal controls for financial reporting.

A swathe of senior people have left recently including its UK money laundering reporting officer, UK chief risk officer, UK data protection officer and both UK and global heads of regulatory compliance.

Other stories to keep you in the loop

UK's cost of living crisis 'just beginning' according to JPMorgan
Cineworld files for US bankruptcy
Royal Mail workers to stage another two-day strike in pay dispute
London craft brewer Beavertown sells up fully to Heineken
Ocado names new CEO
Goldman Sachs expands in Birmingham with office for 800
The key product announcements from the Apple event
Gulf Arab states demand Netflix remove 'immoral content'
Judge refuses to delay Musk Twitter trial
Kim Kardashian launches private equity firm

CARS
Porsche plans mega European public market debut

What happened?
This week Volkswagen Group confirmed its intention to list shares in luxury car brand Porsche in the coming weeks — if successful the IPO would be one of the largest in recent European history.

How did we get here?
Volkswagen owns a suite of carmakers including Volkswagen, Audi, Lamborghini and Bentley. Its plan to take Porsche public could value the brand between $60bn and $85bn.

Although just 12.5% of the total Porsche shares will be sold to investors, the listing should raise over $10bn giving Volkswagen more financial firepower to complete the costly transition to electric vehicles.

Volkswagen plans to spend close to $90bn over the next five years on electric car development, with the ambitious goal of a quarter of total sales being electric by 2026.

The Porsche-Piech family, made up of direct descendants of the founder, will end up owning some 25% of voting shares in the company. They'll be hoping that Porsche shares will race higher as a result of the public listing, just like Ferrari's did in 2015 when the Italian company was spun out from its parent company, Fiat Chrysler.

Zooming out: Pulling off an IPO this year would be a huge achievement for Porsche. The war in Ukraine, rising inflation and growing concerns of a recession has made 2022 a turbulent year for stock markets. Many companies have canned their plans to go public amidst the turmoil. In the first six months of this year there has been just 57 IPOs in Europe, down from 231 in the same period in 2021.

Stat of the day

25m people tuned in to the premiere of Amazon Prime’s The Lord of the Rings: The Rings of Power last week, making it the biggest debut in the streaming platform’s history

Interesting links from around the web

31 small items that could make your life a tiny bit better
15 under-the-radar TV shows that you should watch
The pitch decks of billion dollar startups

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Market Loop - Revolut undergoes major cost review

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