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Nik Storonsky, CEO of Revolut, has begun his career as an equity derivatives trader. This is a business built on the idea of betting in limited downsides and potentially large rewards. If he could turn the UK Challenger Bank into a giant, investors offering him a multi-billion dollar bonus are doing similar calculations.
Storonsky is lined up to receive up to 10% of the company’s worth of stake if it meets its targets, such as leading Revolut to a valuation of around $150 billion, the Financial Times reported this week. The $15 billion payment will trigger an echo of Elon Musk’s gorgeous bonus at Tesla, prompting two questions. Is it reasonable or is it realistic?
On the one hand, the shareholders would have benefited much more than the cost of payment, as the targets are so ambitious they would have had to attack iteratively. The same case was created for the $560 billion salary prize in the 2018 Musk controversy, but the fact that Revolut is private should reduce the risk of fraudulent shareholders bringing complaints, as happened to Musk.
It is not very clear whether it is achievable or not. Headline’s goal is to focus on the same market capitalization as Citigroup. For that benchmark, the goal seems to be delusional. Citi will trade with 12 times the revenues over the past 12 months. Revolut should increase its net profit by about 1,100% with the same valuation. Alternatively, you’ll need to increase your net worth by 5,600% to match City’s price-to-book ratio.
Storonsky probably has Racier Peers in mind. A more unbiased comparison could be the Digital Transactions Wiz Robinhood Markets or the Latin American digital lender Nubank. At multiples like Robinhood, 44x last year, Revolut’s net profit would only triple to meet its $150 billion valuation.
It’s still ambitious, but so is the founder of Revolut after that. When the UK’s most valuable fintech with injecting new funds in 2020, his first instinct was to complain that the deal was not enough. If Revolut maintains its growth rate last year and trades with 28x generous revenues of 28x 28x over two years, it is worth $150 billion. Its trajectory could depend on the continued popularity of cryptocurrencies, which was a major driver of last year’s growth surge.
Musk comparisons are appropriate in one important way. Tesla’s assessment is about Musk’s Moonshot plan and its ongoing belief in the ability of investors to carry out them, just like in the real auto manufacturing industry. Similarly, even if Crypto Boost declines, Revolut’s supporters are betting on Storonsky’s long-standing dreams to turn Revolut into a “SuperApp” with all businesses, from telecoms to car rentals.
Storonsky once said that the key to growth is to “strive towards huge goals that seem low odds.” At this point, a $15 billion bonus seems like a goal for one low probability. But the same was true of mask masks in 2018. Something strange happened.
nicholas.megaw@ft.com
