One word keeps coming up in conversation with Kristo Kaarmann: cool.
While other chief execs of soon-to-be-public companies typically spend time explaining why investors should be snapping up shares, Kaarmann seems more interested in marvelling at the satisfying mechanics of Wise's plan to go public.
“One of the cool things about going public or listing our shares is we can now have a much broader ownership and that also means our customers can become owners of Wise, which is really cool," he says.
We talk on Thursday, hours after Wise confirmed plans to join the London Stock Exchange through a direct listing – an unusual mechanism that will see the company swerve investment bankers and not raise any new money. The method was popularised by Spotify (SPOT) when it went public in New York in 2018 but it is rarely seen on this side of the Atlantic.
“There’s no transactions that happen in the beginning so really the shares start trading one day on the London Stock Exchange with an opening auction like it does every day and then we’ll be a listed company," Kaarmann, who cofounded the business in 2010, explains.
With no new money coming in, what's the motivation to go public at all? Kaarmann says it's about giving customers the chance to share in his business's success.
"We think about it this way: we had £421m of revenue in the last financial year but what it really means is our customers paid us £421m to do what we do last year," Kaarmann said. "That’s pretty cool. But imagine if lots of them were also the owners of the company – then, their interests would be even better aligned."
As part of the go-public plan, Wise aims to launch OwnWise – another innovative part of the listing. Customers will be encouraged to buy shares and Wise will reward those who do with one additional share for every 20 they hold for at least 12 months. It's a neat way of incentivising retail investors to come to the market and offer liquidity, while at the same time letting customers share in the business's success.
“We already have all of the Wise employees who are shareholders," Kaarmann says. "Roughly 4,000 people who have worked at Wise over time, they’re all shareholders. We have a small group of financial shareholders as well. As we go live, and through this OwnWise programme, we’re making it easier for customers to become shareholders."
Matt Briers, Wise's finance chief, chimes in: "Because we don’t need to raise capital, we have the opportunity to do this and it’s in our DNA and our principles to do this transparently and fairly."
Kaarmann, originally from Estonia, founded the business – then called TransferWise – with fellow countryman Taavet Hinrikus in London in 2010. The idea came after the pair discovered they were both being ripped off on international money transfers.
"I was working at Deloitte, Taavet was working at Skype at the time," Kaarmann recalls. "We both had a very similar problem, just the two sides of the problem. I was sending money to Estonia because that’s where my savings account was and he had to pay his rent in London but he was being paid in euros by Skype, which was built in Estonia at the time. We started swapping money with each other. We kind of built an offline version of TransferWise in 2007 already."
The pair made headlines early on for calling out banks for what they saw as rip-off rates and lobbied lawmakers to legislate for more transparency on pricing.
"We had this hypothesis that this is probably not just a Kristo and Taavet problem," Kaarmann recalls. "It’s a little larger than that."
Others saw the opportunity too. Virgin mogul Sir Richard Branson was an early backer, as was famed Silicon Valley venture capital firm Andreessen Horowitz. More recently, Scottish money manger Baille Gifford has become a significant shareholder.
Today, Wise transfers almost £5bn a month over its network at rates it claims are as much as 12 times cheaper than mainstream banks. What began as a way to send money from the UK to the EU now covers large swathes of the globe – all the way from the Americas to Asia. It has branched out into business accounts and currency cards.
A focus on technology and a lack of branch networks have kept costs down and make expansion relatively cheap. The direct listing will also keep costs down by avoiding the millions of pounds of fees a bank would charge for a typical IPO.
"What’s really cool about this direct listing, or what makes it different from an IPO, is these IPOs most of the time happen behind closed doors," says Kaarmann. "Investment banks are soliciting buyers and sellers, in very large part being institutions.
"In our case, with a direct listing, where we got to put much more attention is: how do we make our registration documents, everything that we bring to the market, really understandable to the retail investor by thinking of our customers? Not really giving an upper hand to institutional investors but making sure that everyone has pretty much the same information as we come to market."
Wise has not set an exact date for when shares will be listed but it is likely to be early next month.
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