Exclusive: Robinhood re-negotiates Ziglu acquisition deal, leaving some crowdfunding investors at a loss

Investors in Ziglu’s last two funding rounds will see a loss following its acquisition by digital wealth giant Robinhood, according to documents seen by AltFi, as the fintech giant looks to cut Ziglu'e price by 60 per cent.

Robinhood first agreed to a deal to buy UK-based Ziglu in April 2022, marking its second attempt to expand internationally with a UK base, which it pulled back from, as we exclusively revealed, in 2020. 

“Ziglu’s impressive team of deeply experienced financial services and crypto experts will help us accelerate our global expansion efforts,” said Vlad Tenev, CEO and Co-Founder of Robinhood Markets in a blog post when it announced the deal in April.

“Together with the Ziglu team, we’ll work to leverage the best of both companies, exploring new ways to innovate and break down barriers for customers across the UK and Europe,” it added.

Now Robinhood wants to pay a lower price for the business owing to a shift in market conditions for crypto as well as notable failures "including Celsius, BlockFi and Voyager" as well as the general malaise in the macro economy and ongoing geopolitical tensions. 

Ziglu, was founded in 2014 by Mark Hipperson (pictured) who was one of the founding team of Starling Bank. It offers cryptocurrencies to retail users as well as a debit-style card for spending crypto.

At the time it last raised money through a crowdfunding round in November of 2021 when it raised £7m from thousands of retail investors it was valued at £85m. 

The deal agreed with Robinhood in April was for $170m.

Now Robinhood has revised its offer to c.£60m ($72.5m) or a share price of £28.29.

The last two rounds of funding had share prices of £34 (September 2020) and £48.3 (November 2021), respectively.

Now, according to documents seen by AltFi addressed to shareholders coming directly from Hipperson than figure is being revised down. 

In the letter, Hipperson states that if Robinhood were to terminate the existing sales and purchase agreement (SPA), a legal contract between buyer and seller, Ziglu would be left in an “extremely challenging market, and undercapitalised for the period ahead”.

While the deal does mean a lower price for the business, and less cash for shareholders overall, Hipperson also notes that it will remove a number of covenants including a $10m indemnity escrow fund that was to be deducted from the sale purchase price and held for 18 months in case of any warranty claims. 

Under the new offer from Robinhood, it will take on ‘post-closing’ liability instead barring a $500,000 fund arising to pricing shifts among other costs.

“The board has spent significant time in discussion with Robinhood’s CEO and executive team negotiating and improving the terms of their revised offer. Based on these discussions and other considerations, we believe the revised proposal...is the best and only reasonable path forward for the company,” Hipperson said.

Hipperson says the board and majority of equity holders’ voting rights approve the new deal.

Robinhood and Ziglu were unavailable to comment to AltFi at the time of publication.