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 stock market changes planned by the Chancellor, will also innovate 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.
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And here is the story of how Wise Managing Director Kristo Käärmann and his business partner Taavet Hinrikus were inspired to set up the company to avoid cross-border transfer fees themselves.
Benjamin Ensor, research director, at fintech consulting 11: FS says raising capital will help Wise grow faster in adjacent markets.
It could also help the company build relationships with clients who choose to invest (they will enjoy perks such as Wise’s “swag” and travel to attend corporate conferences).
“Being listed and having shareholders was the last bastion for big banks to defend against fintechs that disrupt them… what now? “