Intelligent debut on a uncommon London direct checklist

The Wise logo is displayed on a smartphone screen.

Pavlo Gonchar | SOPA pictures | LightRocket via Getty Images

LONDON – UK fintech giant Wise got off to a solid start on its highly anticipated debut Wednesday, which left the company with a market value of £ 8 billion ($ 11 billion).

Stock of Wise, formerly known as TransferWise, opened at £ 8 a share at 11am London time and rose to £ 8.31 before settling at £ 8.26 in early afternoon trading.

The money transfer company chose to be listed in London through direct listing, a rare method of IPO introduced by Spotify in the US in 2018. Instead of raising money on an IPO, Wise’s private backers are selling their existing shares to the public.

The listing is a victory for London, which aims to become a leading global technology center after the UK leaves the European Union.

Unconventional listing

In an unusual move, Wise also introduced a program called OwnWise, which allows users to own an interest in the company. Customers who participate in the program will be eligible for bonus shares worth up to £ 100 after 12 months.

“It feels very consistent with their brand, especially the direct listing,” Russ Shaw, founder of Tech London Advocates, told CNBC.

“They bypass the often very expensive process of going public and go straight to the market, straight to their customers, to avoid as many interim costs as possible,” he added.

Wise is one of the UK’s biggest and most famous fintech unicorns. The listing is seen as endorsement of the country’s burgeoning fintech sector, which spawned multibillion dollar companies like Revolut and Checkout.com and attracted $ 4.1 billion in investments in 2020.

The company was founded in 2010 by Estonian friends Taavet Hinrikus and Kristo Käärmann. Frustrated with the high fees they had to pay to send money between the UK and Estonia, the pair devised a new way to make cross-border transfers at the real exchange rate.

Wise, which makes money on cross-border transaction fees, has been profitable since 2017. In fiscal 2021, the company doubled profits to £ 30.9 million ($ 42.7 million) while sales climbed 39% to £ 421 million.

A victory for London

At $ 11 billion, Wise’s market cap is more than double the $ 5 billion private investors valued in 2020. The float turned the founders of Wise into billionaires. Käärmann’s share is now around US $ 2.1 billion and Hinrikus’s stake is US $ 1.2 billion.

The debut is also good news for early Wise investors like Peter Thiels Valar Ventures and Andreessen Horowitz.

Wise’s debut is also a big win for the UK, which aims to attract more tech companies to the stock market with reforms to London’s listing rules after Brexit. At the same time, as the first direct listing of a technology company in London, it was also a risky venture. That said, it has emerged as the largest London technology listing in history by market cap.

“Joining the main market wisely through its direct listing shows that global technology companies can build, expand and go public in London,” said Julia Hoggett, CEO of the London Stock Exchange.

“In addition to high standards of corporate governance and effective regulations, London offers access to extensive international capital pools.”

However, Wise’s decision to list with a two-class stock structure – which gives founders and early investors expanded voting rights – could prove controversial for some investors. Grocery delivery company Deliveroo slumped up to 30% on its first day of trading, in part due to governance concerns about its two-tier stock structure.