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Wise completes largest direct listing in UK history at £8bn

Wise completes largest direct listing in UK history at £8bn

Wise, one of the UK’s leading fintechs goes public on the London Stock Exchange today, with first trades expected to commence shortly after 11:22am BST under the ticker ‘WISE’.

The highly anticipated move was confirmed by the money transfer firm itself in June, and is expected to be a test for the post-Brexit London market. The Hill Review, Kalifa Review into Fintech and the FCA’s consultation into SPAC listings have defined 2021, demonstrating clear political and industry-based interest in making the UK a more attractive place to list. Chancellor Rishi Sunak has also made his intention to attract and retain tech business apparent on numerous occasions.

Wise, unlike many tech counterparts, has been profitable for years, doubling its profits to £30.9 million in its 2021 fiscal year. It currently caters to over 10 million individual and business customers, processing over £5 billion in cross-border transactions every month.

As part of a speech to Wise employees, known internally as ‘Wisers’, Kristo Käärmann, CEO and co-founder said: “Wise was created to solve the problem of the billions unknowingly spent in hidden fees every year on currency exchange. Those are the billions we care most about, even today.”

“Our listing is incredibly exciting, and lots of hard work from many people has made it a reality. But, it’s important to remember that we’re still very early on in our journey. Moving money into another currency is still a maze of hidden exchange rate mark-ups, high fees, delays, and small print for many people. We’re currently saving customers around £1 billion a year in these hidden fees. The £149 billion that’s still to go remains our focus.”

In a LinkedIn ‘Live’ speech given by Wise’s founders on the listing, the duo encouraged would-be investors that if they do choose to buy in today, “do it for the £1 billion [per year] we save our customers, don’t do it for the stock price.”

Wise’s decision to pursue a direct listing follows the approach taken by Spotify, Slack and Coinbase, and avoids the need for underwriting and fees that come with a traditional IPO. It is also a faster and more of a level playing field for institutional and retail investors who are able to buy shares at the same time.

Susannah Streeter, senior investment and markets analyst, Hargreaves Lansdown commented that: “a direct listing system is viewed as cheaper and simpler than a traditional IPO where the whole process is managed by expensive investment banks which underwrite new shares and help find institutional and sometimes retail buyers for them.

“Instead of new shares being listed, only existing ones held by early investors or the founders are traded on an exchange, so underwriters don’t have to be paid and shares aren’t diluted. However, the risk is that not as much interest is drummed up, and there is no guarantee for share sales as it relies purely on supply and demand.”

As the firm chose a dual class structure, under current rules it will not be eligible for a premium listing. However, following recommendations put forward in the UK government’s Hill listings review this may change.

Streeter warned that retail investors should be aware that under such a structure, they won’t have as many voting rights as they might do if they hold shares in other companies listed in London. This arrangement may also put off some institutional investors who are uneasy about the lower levels of corporate governance brought about by a dual class structure.

“As this is a direct listing, there will be a lengthy opening auction period from 7.50am to establish the opening share price. Trading is expected to commence just after 11.00am and we would expect it to be a volatile affair.’’

Dan Thomas, technology senior analyst at Third Bridge added: "Wise is a disruptor in the international remittances space which has previously been dominated by international banks and a handful of incumbent wire transfer businesses like Western Union and Moneygram."

"Wise doesn’t actually wire money in the same way as a Western Union or Moneygram, rather it holds balances in countries on popular currency routes to sidestep the high fees associated with conventional wire transfers. Wise has a distinct advantage over peers like Western Union and Moneygram because origination is 100% digital and they don’t have to maintain a network of physical locations to disburse cash. Wise will also be counting on growing its footprint in the much larger B2B cross-border payments space."

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