UK markets close in 6 hours 17 minutes
  • FTSE 100

    7,053.07
    +25.59 (+0.36%)
     
  • FTSE 250

    23,772.56
    +139.72 (+0.59%)
     
  • AIM

    1,280.22
    +8.08 (+0.64%)
     
  • GBP/EUR

    1.1714
    -0.0004 (-0.04%)
     
  • GBP/USD

    1.3793
    -0.0003 (-0.02%)
     
  • BTC-GBP

    34,701.02
    -336.91 (-0.96%)
     
  • CMC Crypto 200

    1,222.83
    -10.46 (-0.85%)
     
  • S&P 500

    4,473.75
    -6.95 (-0.16%)
     
  • DOW

    34,751.32
    -63.07 (-0.18%)
     
  • CRUDE OIL

    72.21
    -0.40 (-0.55%)
     
  • GOLD FUTURES

    1,766.40
    +9.70 (+0.55%)
     
  • NIKKEI 225

    30,500.05
    +176.71 (+0.58%)
     
  • HANG SENG

    24,920.76
    +252.91 (+1.03%)
     
  • DAX

    15,736.45
    +84.70 (+0.54%)
     
  • CAC 40

    6,684.68
    +62.09 (+0.94%)
     

Wise's unconventional listing is big test for London

  • Oops!
    Something went wrong.
    Please try again later.
  • Oops!
    Something went wrong.
    Please try again later.
  • Oops!
    Something went wrong.
    Please try again later.
  • Oops!
    Something went wrong.
    Please try again later.
  • Oops!
    Something went wrong.
    Please try again later.
  • Oops!
    Something went wrong.
    Please try again later.
·Senior City Correspondent, Yahoo Finance UK
·4-min read
In this article:
  • Oops!
    Something went wrong.
    Please try again later.
  • Oops!
    Something went wrong.
    Please try again later.
  • Oops!
    Something went wrong.
    Please try again later.
  • Oops!
    Something went wrong.
    Please try again later.
  • Oops!
    Something went wrong.
    Please try again later.
  • Oops!
    Something went wrong.
    Please try again later.
Kristo Kaarmann, co-founder & CEO of Wise. Photo: Eóin Noonan/Sportsfile via Getty Images
Kristo Kaarmann, co-founder & CEO of Wise. Photo: Eóin Noonan/Sportsfile via Getty Images

Don't say entrepreneurs aren't a brave bunch — just look at Kristo Kaarmann.

The co-founder and chief executive of Wise, the multi-billion pound money transfer business, is about to steer his company through an unconventional stock market listing in London just months after other tech businesses were snubbed.

Wise on Thursday announced plans to list in London through a direct listing — an uncommon method of going public where shares are just listed on a stock market and left to trade. 

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

By simply opening up to buy and sell orders, Wise's stock price and valuation will be totally at the whims of the market. Judging by the experience of other tech businesses so far this year, the market might not be particularly kind.

Deliveroo's (ROO.L) stock dropped as much as 30% on its debut in March. Semiconductor company Alphawave (AWE.L) suffered a 18% crash in May. This week, online furniture retailer Made.com (MADE.L) sunk 8% on its first day of trade — almost respectable given the recent run.

All three businesses pursued an IPO, which involves an investor 'roadshow' where management pitch their business to top institutional investors. A roadshow lets companies gauge investor appetite so bankers can set share prices at a level that interests buyers. It also allows companies to secure 'anchor' investors to provide stability and signal to the market this is a serious company with serious backers.

Read more: Deliveroo shares plunge on London stock market debut

Wise will have no such luxury. A direct listing means the company will just have to hope investors have read about Wise in the press and liked what they saw.

Given the experience Alphawave, Made.com, and Deliveroo, perhaps the decision is understandable — who needs investment bankers when they get it this wrong? At least Wise won't go through the embarrassment of seeing overpriced shares sink.

But complicating things further is Wise's decision to opt for a dual class share listing. This structure will hand management total control of the company for five years. While this set up is common for tech businesses in the US, European investors have been less keen on it. Deliveroo's decision to opt for a dual class structure was cited as one of the reasons for its poor reception earlier this year.

The TransferWise app (renamed as Wise now). Photo: Rafael Henrique/SOPA /LightRocket via Getty Images
The TransferWise app (renamed as Wise now). Photo: Rafael Henrique/SOPA /LightRocket via Getty Images

Wise is not the same as Deliveroo. Unlike the takeaway app, Wise is profitable and has healthy margins. The business isn't dogged by concerns about treatment of contractors and looming regulation. And where investors worried Deliveroo may have peaked during the pandemic, Wise's focus on cross border payments is a more long-term trend that is likely to continue to grow. 

Wise moved £54.4bn ($76bn) on behalf of 6 million active clients last year and Kaarmann is hoping to rely on some of these customer to support the listing. The company is launching a new scheme dubbed OwnWise to encourage its customers to buy into the business. Here, the company is borrowing the tactics of crowdfunding. Consumer-facing businesses have long recognised that crowdfunding allows them to not only tap customers for cash but also incentivise them to act as sales people for the brand. Investors will sound off about the business to anyone who will listen because their own finances are at stake.

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

Despite all this, Wise's direct listing is a leap of faith. Breath will be held as the opening bell rings on the first day of trade.

Wise's experience will be another barometer of London's appetite for tech. Chancellor Rishi Sunak's attempts to make the UK more attractive for tech listings have so far fallen flat. Mature business continue to choose New York over London. Wise's experience could determine whether that trend continues. If the direct listing proves a success, the model could offer an alternative to businesses who want to stay in the UK.

"I hope Wise has opened an alternative avenue to the public markets for other UK technology businesses to ensure we have a thriving tech scene for decades to come," said Stephen Kelly, chair of the group Tech Nation. "The UK needs more poster-children and role models to inspire the next generation."

Watch: What are SPACs?

Our goal is to create a safe and engaging place for users to connect over interests and passions. In order to improve our community experience, we are temporarily suspending article commenting