For the past few months, many British companies have been seen listing on London Stock Exchange. One of them is Wise, which went public through a direct listing in London on the 7th of July. The company was valued at nearly £9 billion, marking another record deal as the UK market competes with Wall Street to attract the ever-growing wave of high-tech companies.
Unlike the traditional Initial Public Offering (IPO), Wise decided to go for a direct listing on which its share began trading without raising any coin. The company is listed with a dual-class structure which had previously raised concerns to many UK investors. However, the listing went on smoothly with its shares beginning to trade at 800p under the advisory of Morgan Stanley, Goldman, Barclays, and Citigroup.
About 12 months ago, the company secured a secondary share sale with a valuation of more than double the £3.6 billion ($5 billion). By the close of trading, its share value had increased to 10 percent, raising its valuation to nearly £8.8 billion.
The Company History
Wise, formerly known as TransferWise, was founded in 2011 by Kristo Kaarmann and Taavet Hinrikus. The two Estonians were frustrated by the high costs of frequent money transfers and founded Wise to reduce transfer fees for those who need to send money internationally. The company also started with the idea of using a real exchange rate to send money globally, instead of applying a premium at a bank.
Although Wise still charges a premium to transfer money, it claims to be 8 times cheaper than most banks and 3 times cheaper than PayPal. It has also partnered with several banks and payment services like Monzo and Google Pay to use the platform in their international transfers.
As such, the company has drastically expanded since 2011 with over 2,400 employees, 10 million customers, $7 billion sent every month, and 14 offices globally. It has also recorded its third year of profit in 2021 with over £24.1 million, an increase of 14%, from the £16.6 million of 2020.
What the Listing Means for Wise and UK Market
The Wise valuation at around £9 billion means the UK government is ready to welcome more tech groups to London. Remember, these ambitions were once shuttered earlier this year when the IPO of food delivery app, Deliveroo, was poorly received by investors. Deliveroo is now valued at £5.5 billion.
During the celebratory ceremony held at the group’s Estonian office, Kristo Kaarmann told his staff that, although the listing is amazing, it is crucial to remember that the journey has just started. The listing has also turned the founders into the Baltic country’s wealthiest men, according to local business newspaper Aripaev. For instance, Kaarmann became a paper billionaire with his 19% stake in the company now valued at nearly £1.7 billion.
The Financial Conduct Authority also outlined a series of proposals to help London compete with rival financial centers such as New York and Hong Kong. These proposals include lowering the minimum free float percentage for new companies from 25% to 10%. According to experts, this move would make direct listings a feasible option for more companies.
(Written and edited by The Decision Maker team)