The wise direct listing is a big test for London


Wise CEO and co-founder Kristo Kaarmann.

Wise

LONDON – Wise, one of Britain’s largest fintech companies, is about to go public. And it will be a major test for post-Brexit London.

The money transfer company has chosen to list its shares directly on the London Stock Exchange, using a rare listing method developed by Spotify in the United States three years ago.

The first trading on Wise is expected to begin shortly after 11:22 a.m. London time, according to the company’s prospectus.

What is Sage?

Wise, formerly known as TransferWise, was founded in 2010 by Estonian friends Taavet Hinrikus and Kristo Käärmann. Frustrated with the high fees they faced in sending money between the UK and Estonia, they devised a new way to make cross-border transfers at the real exchange rate.

The service proved popular with the British and quickly expanded abroad. Wise claims to have more than 10 million customers who use its service to send £ 5 billion ($ 7 billion) across borders every month.

Wise competes with incumbent wire transfer operators like Western Union and MoneyGram, as well as fintech startups like Revolut and WorldRemit.

Unlike many VC-backed tech companies, Wise has been profitable for years. The company first broke even in 2017. In its 2021 fiscal year, Wise doubled profits to £ 30.9million ($ 42.7million) as revenues increased by 39% to reach £ 421 million.

The main shareholders of Wise are the founders Käärmann and Hinrikus, who own 18.8% and 10.9% respectively of the company. The start-up’s first external investor is Peter Thiel’s Valar Ventures, who owns a 10.2% stake in the company.

Käärmann and Wise’s early investors will enjoy enhanced voting rights for five years after Wednesday’s listing thanks to a planned dual-class share structure. Tech giants like Facebook and Alphabet were the first to pioneer such ownership structures.

What is a direct ad?

It is an alternative to an initial public offering, or IPO, where a private company offers shares to the public for the first time.

Swedish music streaming service Spotify was one of the first to adopt the method, going public via a direct listing on the New York Stock Exchange in 2018. The American workplace messaging app Slack and the Coinbase cryptocurrency exchange have also gone public through direct listings.

Unlike a traditional IPO, companies that list directly do not issue new shares or raise new capital. This process also forgoes investment bankers to subscribe to the offer. However, Wise is advised by banks like Goldman Sachs and Morgan Stanley.

Tech founders and venture capitalists say direct listings may be a more attractive route to the stock market than an IPO because they avoid paying high subscription fees and possible valuation error actions.

Wise was last valued at $ 5 billion in a secondary stock sale. As it is listed directly, there is no pricing process like the one companies normally go through with an IPO, and the price of the stock will be determined by the market once it is listed.

Why is it important?

Wise’s listing is a big win for London, which is looking to attract more tech success following Britain’s departure from the European Union.

UK regulators are currently consulting on proposals to relax London’s listing regime and make it more attractive for tech companies to list in the capital.

It’s also a validation for the country’s burgeoning FinTech sector, which has produced multi-billion dollar unicorns like Revolut and Checkout.com and attracted $ 4.1 billion in venture capital investments. Last year.

However, Wise’s chariot will also be an important test for the city. Wise says its market debut will be the first direct listing for a tech company in London.

“It’s risky,” Russ Shaw, founder of Tech London Advocates, told CNBC. “It really hasn’t been done that often, especially with a FinTech company. “

But, he added: “It’s a profitable business. They don’t have the luggage that Deliveroo brought to the table.”

The IPO of food delivery company Deliveroo was rejected by large institutional investors over concerns over its gig economy model and dual-class equity structure that gave founder Will Shu more than 50% of the voting rights. Deliveroo plunged to 30% on its first day of trading.

Despite concerns about governance with such ownership structures, Wise said its dual class shares are structured in such a way that no existing shareholder will hold more than half of the voting rights simply by owning Class B shares. .


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