Introduction Of Bolt
Update: We spoke with Ashesh Shah, the founder and CEO of the fund leading Bolt’s proposed $450 million raise for additional detail on the deal. Read the full interview here.
Bolt, the one-click checkout startup, is facing significant challenges as it pushes forward with a controversial financing deal that threatens to dilute existing shareholders’ stakes. The deal, spearheaded by its co-founder Ryan Breslow, has garnered substantial attention due to its aggressive terms and the company’s tumultuous history.
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Background of the Deal
On Tuesday, Bolt announced its intention to raise $450 million, pushing its valuation to a potential $14 billion. The announcement also coincided with Breslow’s return as CEO after his departure in February 2022, following allegations of misleading investors and inflating metrics during fundraising. His return comes at a time when the company is embroiled in legal battles and seeking to recover from past controversies.
The proposed Series F funding round, primarily backed by UAE and UK investment firms, aims to bring in significant capital at a higher valuation. However, the terms of the deal have raised eyebrows. Bolt’s existing shareholders were presented with an ultimatum: either buy more shares at a higher price or risk having their shares bought back by the company for a mere 1 cent per share.
The “Pay-to-Play” Structure
The deal is a modified version of a “pay-to-play” transaction, where existing investors must buy their pro-rata shares or face punitive consequences. In this case, Bolt is seeking to buy back 66.67% of non-participating investors’ shares at a token price. The move is designed to pressure current investors into supporting the company financially, but it has sparked significant backlash.
Legal expert Andre Gharakhanian, a partner at Silicon Legal Strategy, describes the deal as a twist on the typical pay-to-play structure. He points out that while most pay-to-play deals involve converting preferred shares into common shares for non-participants, Bolt is opting for a forced buyback. This strategy may be difficult to execute due to the company’s corporate charter, which likely requires approval from a majority of preferred stockholders.
Investor Pushback and Legal Hurdles
Despite the aggressive terms, it remains uncertain whether Bolt can successfully push through the deal. Some investors are reportedly resisting the proposal, particularly due to the hefty bonuses Breslow could receive for returning as CEO. These include a $2 million bonus and an additional $1 million in back pay, which have raised concerns among shareholders.
Gharakhanian notes that while Bolt’s leadership has presented the deal to investors, it’s still in its early stages, and approval from preferred shareholders is far from guaranteed. If Bolt cannot secure the necessary approvals, the company could face significant legal challenges, further complicating its path forward.
The Road Ahead
As Bolt navigates this complex and contentious deal, the company faces weeks of negotiation and legal wrangling. High legal fees and investor dissatisfaction are likely outcomes of the process, adding to the company’s existing struggles. Nevertheless, if new financing fails to materialize, non-participating investors may be forced to relent and agree to the deal to avoid a worse outcome.
For now, all eyes are on Bolt as it attempts to secure the funding it desperately needs while managing the fallout from its proposed cramdown. Whether Breslow’s return will be enough to steer the company through these turbulent waters remains to be seen.
