London’s hopes of attracting more technology companies looking to float on the stock market have received a shot in the arm after the fintech firm Wise chose the City for a rare direct listing expected to value the company at up to £9bn.
The international money-wiring company, formerly known as TransferWise, claims to have revolutionised cross-border transactions by cutting out exchange rate markups charged by banks.
The business, created by two Estonians set to become billionaires in the float, plans to deploy an unusual method to come to market, listing shares for public trading on the London Stock Exchange without issuing new equity.
The float, likely to be seen as a victory for the chancellor’s planned stock market changes, will also break new ground for the City of London.
Rishi Sunak last year commissioned the Tory peer Lord Hill to examine ways to lure fast-growing tech companies away from centres such as New York, the traditional stage for their stock market debuts.
The review is widely expected to permit companies with “dual class” share structures to obtain a premium listing on indices such as the FTSE 100.
Dual-class structures are popular with Silicon Valley startups because they allow founders to retain significant control, even after selling chunks of equity to major investors and the public.
Deliveroo’s float was supposed to be the poster child for Sunak’s overhaul earlier this year but flopped on debut, with its share structure cited as off-putting by some investors. The debacle raised concerns that other tech firms could avoid London.
But Wise will also press ahead with a dual-class system, with existing investors, including the institutional backers Baillie Gifford and Fidelity, getting enhanced voting rights for a set period of time.
Wise’s co-founders, Kristo Käärmann and Taavet Hinrikus, whose respective 20% and nearly 12% stakes could be worth £2.9bn combined, will have those rights, as will Sir Richard Branson, who holds a small undisclosed stake.
Staff, known within the company as “Wisers”, will also get shares, while customers who buy shares and hold them for at least a year will be offered perks such as Wise “swag” and trips to company conferences known as “mission days”.
Wise, which says its 6 million active customers send £5bn a month using the service, will also be the first technology firm to float in London via the seldom-chosen direct-listing option.
Typically, companies opt for an initial public offering, in which banks charge hefty commission fees to help drum up interest from investors and set a price to offer the stock at.
They also underwrite the process, mopping up any stock that is not sold.
But the direct listing bypasses this process, meaning Wise’s value will become clear only as trading starts, rather than an estimate being set beforehand.
Wise described the direct listing as a “fairer, cheaper and more transparent” way of coming to market, in keeping with its stated mission of offering a cheaper and faster way to manage the £18tn of cross-border transactions that occur each year.
It said a direct listing was an option because it was not relying on the sale of new shares to raise cash for growth, having been profitable since 2017.
Pre-tax profit doubled to £41m in the year to the end of March 2021, according to documents filed on Thursday, on revenues of £421m.
The company’s customers are mostly personal users who transferred an average of £9,000 during the year.
Karmann said: “Wise is used to challenging convention, and this listing is no exception. We’re fixing a huge, structural problem on a global scale, and one which requires enormous discipline to solve.”