London’s hopes of attracting more tech companies looking to go public received a boost after fintech firm Wise picked the City for a rare direct listing that is expected to value the company up to 9 billion pounds sterling.
The international money transfer company, formerly known as TransferWise, claims to have revolutionized cross-border transactions by removing exchange rate markups charged by banks.
The company, created by two Estonians on the verge of becoming billionaires in the float, plans to deploy an unusual method of entering the market, listing shares on the London Stock Exchange without issuing new shares.
The float, likely to be seen as a victory for the changes planned by the stock market chancellor, will also pave a new path for the City of London.
Last year, Rishi Sunak tasked conservative peer Lord Hill to examine ways to lure fast-growing tech companies away from hubs like New York, the traditional scene of their stock exchange debut.
The review should largely enable companies with “dual class” share structures to obtain a top 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.
The Deliveroo float was supposed to be the child star of Sunak’s redesign earlier this year, but failed early on as its equity structure was seen as off-putting by some investors. The debacle has raised fears that other tech companies may be avoiding London.
But Wise will also continue with a dual-class system, with existing investors, including institutional backers Baillie Gifford and Fidelity, getting enhanced voting rights for a set period of time.
Wise co-founders Kristo Käärmann and Taavet Hinrikus, whose respective stakes of 20% and nearly 12% could be worth £ 2.9 billion combined, will have those rights, as will Sir Richard Branson, who owns a small non-stake. disclosed.
Staff, known within the company as ‘Wisers’, will also get shares, while clients who buy shares and hold them for at least a year will be offered perks such as Wise ‘swag’ and trips to corporate conferences called “mission days”.
Wise, which claims its 6 million active customers send £ 5 billion per month using the service, will also be the first tech company to float in London via the rarely chosen direct listing option.
Typically, companies go for an initial public offering, in which banks charge high commissions to help spark investor interest and set a price at which to offer the stock.
They also buy into the process, mopping up any inventory that isn’t sold.
But direct quotation bypasses this process, meaning that Wise’s value will only become clear at the start of trading, rather than an estimate being set beforehand.
Wise described direct listing as a “fairer, cheaper and more transparent” way to enter the market, in line with its stated mission to offer a cheaper and faster way to manage the £ 18 billion of cross-border transactions that occur every year.
He said a direct listing was an option as it did not rely on selling new shares to raise funds for growth, being profitable since 2017.
Pre-tax profit doubled to £ 41million in the year through the end of March 2021, according to documents filed Thursday, on income of £ 421million.
The company’s customers are mostly personal users who have transferred an average of £ 9,000 during the year.
Karmann said, “Wise is used to defying convention, and this list is no exception. We are solving a huge structural problem on a global scale, and one which requires enormous discipline to solve. “