Retail conglomerate Authentic Brands Group, which owns brands like Reebok and Nine West, dismissed its lawsuit against checkout software provider Bolt. It also made an unexpected shift and became a shareholder in the fintech company, according to a Wednesday announcement.
When ABG first became a Bolt customer in late 2020 and hired the company to power online checkout for two of its brands, it negotiated the right to buy up to 5% of Bolt for $29 million, giving Bolt an implied valuation of about $600 million, according to a court document filed by ABG. As fintech startup valuations soared the following year, Bolt reached a stunning $11 billion, a more than twenty-fold rise in less than a year and a half.
In March 2022, ABG claimed in a lawsuit that Bolt was denying ABG its right to buy shares in Bolt at the previously agreed-upon terms. It also said Bolt was failing to live up to technology promises it had made. In a motion to dismiss the suit, Bolt said the allegations in the complaint were “implausible” and that ABG hadn’t met agreed-upon conditions for purchasing shares in Bolt.
Since then, the fintech market has faced a sobering recoil from lofty pandemic-era valuations. As inflation fears loom and ecommerce spending wanes, investors are putting pressure on firms to demonstrate profitability. As of this writing, publicly traded fintech stocks are down 45% year-to-date and some, like buy-now-pay-later company Affirm Holdings, are down nearly 90% from their 2021 high. In May of this year, Bolt joined in a wave of industry-wide layoffs, cutting its workforce by about one-third while citing “market conditions” and macroeconomic challenges.
In the new settlement, ABG has dropped its lawsuit and become a shareholder, although both parties decline to say what valuation ABG paid. It’s almost certainly well below the $11 billion that Bolt reached in January 2022, but it could be above the roughly $600 million valuation set in late 2020. Bloomberg reported that ABG ended up with a less than 5% stake but didn’t have to pay anything for it. Bolt CEO Maju Kuruvilla claims that the company’s “formal valuation” has not changed since its series E funding round, which valued the company at $11 billion.
“There wouldn’t have been a lawsuit if everything worked as was addressed before, and as you can imagine, either party wouldn’t have settled on something that is one-sided,” Kuruvilla said. “The spirit of this is that we were able to find a middle ground that worked for both sides.”
And what about ABG’s claims Bolt’s technology is plagued with technical problems? ABG declined to comment, but Kuruvilla says, “As you can see, they continue to use the product so far and they are going to continue to use it. That is a testament to the product.”