ECONOMY

Wise valued at nearly £9bn after record London direct listing

British fintech Wise was valued at nearly £9bn in a landmark direct listing in London, a rare coup for a UK market vying with Wall Street to attract the next wave of fast-growing tech companies.

Eschewing the traditional initial public offering, Wise opted for a direct listing in which shares in the company began trading on Wednesday without it raising any money.

Wise, which was called TransferWise until earlier this year, provides international money transfer and multicurrency banking services to consumers and businesses. It targets more affluent customers than remittance specialists such as Western Union and regards commercial banks as its biggest rivals.

After a three-hour opening auction, Wise shares opened at 800p, giving the company a valuation more than double the £3.6bn ($5bn) it secured in a secondary share sale 12 months ago. By the close of trading, its share price was up 10 per cent, lifting its valuation to £8.8bn.

The market capitalisation of Wise, founded in 2010 by two Estonians exasperated by the cost of moving money between the UK and the Baltic country, makes it the most valuable technology company to join the London market, according to the London Stock Exchange.

It also comes as a welcome boost to efforts by the UK government to entice more tech groups to London. Those ambitions suffered a setback earlier this year when the initial public offering of food delivery app Deliveroo — now valued at about £5.5bn — was poorly received by investors.

Kristo Kaarmann, Wise’s co-founder and chief executive, told staff in a celebratory ceremony from the group’s Estonian office on Wednesday that while “our listing is incredibly exciting”, it was “important to remember that we’re still very early on in our journey.”

The listing made Kaarmann a paper billionaire, with his 19 per cent stake in Wise now worth nearly £1.7bn. Having founded Wise with Taavet Hinrikus, the company’s success has turned the pair into the Baltic country’s wealthiest men, according to local business newspaper Aripaev.

Hinrikus, who owned around 11 per cent of the group before the listing, is currently chair but will step down within the next year to meet UK corporate governance guidelines that recommend public companies have an independent chair. 

Wise is one of the first of a wave of UK fintechs founded in the wake of the 2008 financial crisis to go public. Unlike many of its peers, Wise has already reported several consecutive years of profitability. The group, which has about 2,200 employees, made a pre-tax profit of £41m in the 12 months to March 31, on revenues of £421m.

One adviser who worked on the listing said that Wise’s record of profits helped explain why UK shareholders warmed to the deal. “Ultimately the big difference between Wise and Deliveroo in a UK market context is profitability versus pre-profitability,” the person said.

Besides its two co-founders, Wise’s largest shareholders before it went public included several US venture capital firms, along with Scottish fund manager Baillie Gifford and hedge fund D1 Capital Partners, according to the listing prospectus.

Direct listings have been growing in popularity among technology groups in the US such as Spotify, Coinbase and Roblox, and executives are hoping Wise will pave the way for more in London.

However, a direct listing would only be appropriate for a relatively small subset of companies that did not need to raise capital and were high-profile enough to attract interest without a canvassing of investor appetite typically done by banks, according to another adviser to Wise.

The Financial Conduct Authority earlier this week outlined a series of proposals designed to help London compete with rival financial centres such as New York and Hong Kong. The suggestions included lowering the minimum free float percentage for companies that join the market from 25 per cent of shares to 10 per cent, a move experts said would make direct listings a feasible option for more companies.

James Wootton, a partner at Linklaters who advised Wise on its listing, said the UK had now “ridden out the Deliveroo blip and some other high-profile deals that had shaky after-market performance”.

Goldman Sachs, Morgan Stanley, Barclays and Citigroup acted as advisers to Wise.

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