(Bloomberg) -- Authentic Brands Group, which owns and licenses brands like Forever 21, has settled its lawsuit against Bolt Financial Inc. The agreement ends months of legal wrangling between the troubled payments startup and its largest active customer, which had claimed that Bolt’s technology was faulty.
ABG was awarded an undisclosed stake in Bolt, the startup said in a statement Wednesday. The companies will continue to work together, with Bolt’s technology powering online checkouts for ABG brands Forever 21 and Lucky Brand. ABG also said it will explore using Bolt’s software for other brands. In the statement, ABG Chairman Jamie Salter called Bolt’s technology “exceptional.”
The agreement marks a dramatic departure from ABG’s stance in its March lawsuit, in which the company accused Bolt of having “utterly failed” to deliver on its promised technological capabilities. ABG also claimed that Bolt overstated the extent of its relationship with ABG portfolio companies in order to entice prospective investors to back the startup at a high valuation.
Bolt responded to ABG's complaints by calling the suit a "transparent attempt" to renegotiate terms of the companies agreements in order to acquire a low-priced stake in the startup. As part of the suit, ABG argued that it should be entitled to buy up to 5% of Bolt for a price set early on in the company’s life. After Bolt’s valuation nearly doubled to $11 billion in an investment round earlier this year, ABG’s claim became increasingly valuable.
Now, as a result of the settlement, ABG will own a “meaningful” share of Bolt, a person with knowledge of the situation told Bloomberg. ABG’s stake will be less than 5%, the person said, but it was not required to pay for the stake.
Representatives for both Bolt and ABG declined to comment on the details of the companies’ agreement or the size of ABG’s stake.
“The settlement is an amicable solution for both sides,” Bolt Chief Executive Officer Maju Kuruvilla said in an interview.
The resolution of the lawsuit follows months of turmoil at the San Francisco-based startup. Early this year, Bolt co-founder Ryan Breslow, then 27 years old, sent a series of tweets comparing Silicon Valley’s elite to “mob bosses,” angering many in the tech world. Shortly after, Breslow stepped away from the CEO job to become executive chairman of the company. The company had also aimed to raise a new funding round at an even higher valuation, but tabled those plans when investors failed to materialize.
Kuruvilla, who assumed the helm in January, laid off about 250 people, or one-third of staff, in May—even though the company had raised $355 million months before. “We have cash runway for close to three years,” the CEO said. “The market is tough and we need to be in a position where we can control our own destiny.”
Kuruvilla said Bolt is now focused on improving its product and targeting specific customers with ready-to-use software, instead of customizing its technology to fit each client. He said that Bolt has signed deals with both Pinterest Inc. and Fanatics Inc., although he declined to provide details on when those companies would start implementing Bolt’s technology.
©2022 Bloomberg L.P.