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Wise move: Tech giant chooses London for blockbuster $6bn listing

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·Senior City Correspondent, Yahoo Finance UK
·4-min read
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Wise co-founder Kristo Kaarmann. Photo: Wise
Wise co-founder Kristo Kaarmann. Photo: Wise

Money transfer "unicorn" Wise, formerly known as TransferWise, has confirmed plans to join the London Stock Market (LSEG.L) in a blockbuster listing that is likely to be one of the biggest of the year.

Wise said in a statement on Thursday it was planning to join the London market through an unconventional direct listing. It marks a win for London, which has lost out on a string of tech listings to New York this year including several UK businesses.

"There will be many more fast growing tech companies behind us listing in London," Kristo Käärmann, Wise's chief executive and co-founder told journalists on a call on Thursday morning.

Read more: Why Babylon Health chose 'more innovative' New York over London for listing

Käärmann co-founded Wise in London in 2010 along with fellow Estonian expat Taavet Hinrikus. The pair were astonished at the cost of sending money back home and set about using technology to make it cheaper.

International money transfer still forms the backbone of the business, with over £50bn ($70bn) sent over its network last year by 6 million customers around the world. The company has since branched out into new areas like business accounts and cash cards. Wise's management say the company's mission is to create "money without borders".

Wise disclosed revenues of £421m last year and rapid growth. A comparison to rivals suggests the company could be valued at between $6bn and $7bn when it joins the market. Wise was last valued at $5bn in a private investment round. Wise won't be raising any new money but will allow existing investors to cash out some gains.

Wise's products. Photo: Wise
Wise's products. Photo: Wise

The float looks to be a key test of London's tech appetite, with several unusual features: Wise will join the London Stock Exchange through a direct listing, give management iron-clad control for at least five years, and encourage Wise's customers to invest in the business.

"Wise is used to challenging convention, and this listing is no exception," Käärmann said in a statement.

"We’re 10 years into building a new way to move money around the world — faster, cheaper, easier and completely transparent. A direct listing allows us a cheaper and more transparent way to broaden Wise’s ownership, aligned with our mission."

Read more: Deliveroo IPO stock flop raises questions for Goldman and JP Morgan

Unlike in an IPO, where share prices and valuations are set before stock begin trading, a direct listing involves shares simply being listed on a stock exchange and allowing the market to find its level. The method was pioneered by Spotify, which used a direct listing to join the New York Stock Exchange in 2018.

"For a tech company of our size and this nature, it really hasn't been done in London and really only a few times around the world," Matt Briers, Wise's chief financial officer, told journalists. "But when we look at look at London, actually the plumbing is in place."

Another unusual feature is OwnWise, a new programme set up to reward customers who invest in shares. Wise customers who sign up to the programme can get bonus shares, among other perks. The scheme echos the features of crowdfunding, where investors are often used to champion a company and its services.

Perhaps the most controversial part of the listing is a dual class share structure that will hand Käärmann and other senior executives super voting rights for a period of five years. The structure means Käärmann will be able to overrule other investors and continue to steer the direction of the business.

Analysis: Wise's unconventional listing is big test for London

Dual class structures were pioneered by Google and are now common for US tech companies. However, European investors have proved less keen on the structure. Deliveroo's (ROO.L) decision to adopt dual class shares was one of the reasons given for its disastrous London debut earlier this year.

"We're not the first large tech company to do this is London, and we're not the first one to do this in Europe," Käärmann said. "I would still say that Europe is early on in this. We're happy to be one in the early batch.

"We have looked at it very carefully, whether we can technically make this work in London — the direct listing venue, the dual class structure venue, fast-growing tech company venue. We're very confident that the infrastructure is there and the environment is there."

No date was given for when shares will begin trading.

Watch: What are SPACs?

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