According to an expert familiar with Bolt’s corporate charter, the company’s aggressive ultimatum to shareholders presents a costly challenge. The ultimatum requires shareholders to purchase more shares at higher prices or risk having their shares repurchased for a mere 1 cent a share, as reported by TechCrunch.
The news that Bolt, a one-click checkout startup, was seeking to raise $450 million at a $14 billion valuation raised eyebrows on Tuesday. This followed a period of controversy, including founder Ryan Breslow stepping down in February 2022 amidst allegations of misleading investors. Breslow has since returned as CEO, as part of a proposed funding round.
The proposed deal, outlined in a letter to investors, details a significant capital infusion and Breslow’s reinstatement as CEO. However, some investors are skeptical given Bolt’s turbulent history and the terms of the transaction, which involve a “pay-to-play” structure.
While the deal seemed promising at first, complications arose regarding investors and the terms of the transaction. Some investors expressed concerns over Breslow’s potential bonus and pay, casting doubt on the feasibility of the deal.
Legal expert Andre Gharakhanian explained that the proposed transaction, a variation of a pay-to-play model, may face challenges due to existing shareholders needing to approve such deals. This poses a significant hurdle to Bolt’s plans.
Despite the hurdles, the deal may still go through with negotiations and compromises. The outcome will depend on whether non-participating investors agree to the terms of the deal, which are designed to pressure them into supporting Bolt financially.
Gharakhanian noted that legal fees for such transactions can be high, and the process can be arduous for all parties involved. However, given the circumstances, he believes that investors may ultimately consent to the deal out of necessity.
A recent amendment to Bolt’s charter adds further complexity to the situation, requiring majority approval from preferred shareholders for any compensatory agreements with Breslow. This suggests that securing shareholder support will be paramount for the deal’s success.
TechCrunch has reached out to various stakeholders for comment on the situation.
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