A Delaware court has given payment startup Bolt the green light to settle with investor Activant over a dispute over a $30 million loan to founder Ryan Breslow.
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In August, Ryan Breslow stunned investors along with his plan to return to the helm of payments startup Bolt. But that shock quickly turned to anger as investors similar to Blackrock and Hedosophia realized that Breslow was aiming to effectively eliminate shareholders who didn’t take part in the $450 million raising. A month later, BlackRock and Hedosophia filed a lawsuit to dam the round.
Six months later, the deal continues to be on hold. But one Bolt shareholder has managed to flee the turbulence. The Delaware Chancellor’s Court ruled in a Dec. 16 hearing that Bolt investor Activant Capital could sell $37 million of its shares back to the startup.
This ruling ends a legal battle that began in July 2023, when Activant sued Breslow, accusing him of burdening the startup with $30 million in debt to repay a private loan after he defaulted on it. Breslow had used his shares as collateral to take out the loan, but as a substitute of allowing them to be called to repay the debt, he repaid the loan with funds from the corporate’s bank accounts after which fired Activant founder Steve Sarracino and others Bolt board members opposed the plan. At the time, Breslow’s attorney said in a motion to dismiss that it was his “full right” to fireside Bolt’s directors and called Activant’s lawsuit “nothing more than sour grapes.”
Bolt and Activant had already reached an agreement to settle the lawsuit in May 2024, but it surely was blocked by an objection from three of Bolt’s largest backers – BlackRock, Hedosophia and Untitled Investments. The courts have now allowed the settlement. That means Bolt Activant can pay $37 million for its shares and the identical value of Breslow’s Bolt shares shall be canceled.
“For the avoidance of doubt, to borrow a phrase from Activant, no one gets a ‘gold star’ here,” Vice Chancellor Nathan Cook of the Delaware Court of Chancery said within the ruling. “Quite the opposite, especially given the long sequence of events that brought us here.”
Activant declined to comment. Bolt declined to comment.
The ruling is a victory for the Connecticut-based enterprise fund, which sought to rein in Breslow and money out its investment in Bolt after leading its Series C round in 2019. As of January 2022, Breslow had a $355 million investment lined up from Wall Street heavyweights like BlackRock, which valued Bolt at over $11 billion, and his own holdings made him certainly one of the world’s youngest billionaires. Weeks later, he resigned as CEO after a Twitter tirade against Stripe, Y Combinator and Sequoia. Then got here lawsuits from clients like Authentic Brands Group, claims of inflated metrics, and an SEC investigation (which the agency later dropped). He returned in August with a plan to boost $450 million to show Bolt right into a WeChat-style super app.
Investors balked on the terms of the deal, which valued Bolt at over $14 billion but left Breslow with a record salary and an expense package as CEO; entangled the startup with Breslow’s other project, the healthcare marketplace Love; and gave investors just just a few days to commit or see 70% of the shares effectively worn out. To top all of it off, Forbes reported that the lead investor named within the round had never heard of Bolt, while not less than $250 million of the round got here in the shape of “marketing loans” from an obscure fund.
“They presented highly unusual press reports that, to say the least, appeared to contradict and undermine the very material allegations in the company’s communications to investors,” Vice Chancellor Cook noted in the choice.
Breslow, Bolt and their remaining shareholders remain stuck in legal limbo because the BlackRock lawsuit stalls. Bolt’s board has formed a special committee to seek out an answer to the conflict with its shareholders. But the committee only consists of 1 person: Bolt director and video game developer Michael Carter, who’s a detailed friend of Breslow. Investors claimed Carter was conflicted and pushed in vain for the appointment of latest independent directors to Bolt’s board and the special committee reviewing the deal.
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Carter joined the Bolt board in 2023 after Breslow ousted quite a lot of directors from Activant, Tribe Capital and WestCap in March 2023. They were replaced by three of Breslow’s friends: music producer Larrance Dopson, journalist Esther Wojcicki (mother of Susan Wojcicki and “Godmother of Silicon Valley”) and The Mighty Ducks child actor and crypto investor Brock Pierce. Carter and Dobson remain on the Bolt board together with real estate developer Joel Schreiber, who’s running against one another Contempt of court allegations in its ongoing legal battle with Starwood Property Trust over a $130 million debt. Schreiber didn’t reply to a request for comment.
Back in August, Breslow called the $450 million fundraising effort essential to Bolt’s reboot, warning that the corporate was losing market share. That sense of urgency seems to have faded as Bolt struggles to reply questions on the strange deal.
For investors who poured over $1 billion of capital into the once-emerging fintech startup, there was some excellent news about its financial health from the court hearing. Although Bolt reportedly lost $310 million in 2023 on revenue of just $27 million, Vice Chancellor Cooked noted, “The company is now in a much better liquidity position and on a better financial footing,” based on numbers, which were disclosed in disclosure hearings but not made public.
This story has been updated to make clear Breslow‘S Response to Activant’s lawsuit.
