Citi Gives Arrival Founder a Loan Tied to $1.5 Billion in Stock

Arrival founder Denis Sverdlov pledged a chunk of his multibillion-dollar stake in the electric-vehicle maker to secure financing from Citigroup Inc., leveraging his biggest listed asset.

An investment firm for the Russian billionaire pledged about 31.5 million Arrival shares -- almost 7% of his holding -- last month as collateral for a credit facility with the bank, according to a regulatory filing. The stake is valued at about $630 million, based on the company’s closing price Wednesday, while shares worth almost $900 million are also available as extra collateral for the lending agreement.

Citi Gives Arrival Founder a Loan Tied to $1.5 Billion in Stock

The transaction allows Sverdlov to access cash without selling stock -- a common technique for company founders and the ultra-wealthy. Elon Musk has used stock in Tesla Inc. to obtain personal loans, while Larry Ellison has put up millions of Oracle Corp. shares to fund his lifestyle. Borrowing against the value of shares, as compared to selling them, offers tax advantages since only realized gains are subject to taxation.

Still, there are risks. Many wealthy investors had to meet margin calls on pledged shares when markets plunged in the early days of the pandemic.

Spokespeople for Arrival and Citigroup declined to comment.

Sverdlov, 43, is worth about $9 billion through his majority stake in Arrival, according to the Bloomberg Billionaires Index. His firm plans to begin testing some of its vehicles on public roads this year.

The company, which makes trucks and buses, debuted on the Nasdaq Global Select Market in March after merging with CIIG Merger Corp., a special purpose acquisition company led by Peter Cuneo. Arrival’s shares have since fallen almost 12%, valuing the company at about $12.3 billion.

Sverdlov, a former Russian deputy minister, was already a wealthy man from a telecom startup before founding Arrival in 2015 and mostly funded the venture himself before the SPAC merger. His other investments include Roborace, a competition for self-driving electric cars.

©2021 Bloomberg L.P.

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