Money transfer firm Wise joined the London Stock Exchange on Wednesday in the biggest flotation of the year and the largest tech listing in the stock market’s history.
The company, formerly known as TransferWise, completed its direct listing on Wednesday – instead of a traditional Initial Public Offering (IPO) – valuing the business at £7.96 billion.
Shares traded at 800p-a-pop and quickly jumped to 825p in early trading with the company saying investor demand was oversubscribed.
The volatility of the price occurred because a direct listing involves the open market setting a price, rather than a range set by traditional investment banks who drum up support for the float from institutional investors.
Shares started trading at 7.50am, allowing enough time for the price to settle before joining the market properly by mid-morning where institutional investors and amateur retail investors could buy shares at the same time.
Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown explained: “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.”
She added: “The Wise listing will be another test for London as a Fintech hub, as the UK grapples with its post-Brexit status in an era when it has struggled to attract fast growing companies looking to launch an IPO.”
Wise joining the Main Market through its Direct Listing demonstrates that global tech companies can build, scale-up and go public in London.
Julia Hoggett, London Stock Exchange
The sky-high valuation beat the next biggest listing on the London Stock Exchange in 2021 – Deliveroo, which had a disastrous flotation in March.
The food delivery platform was valued at £7.6 billion on its launch as a public company but shares soon tanked more than 30%. They have yet to return to their opening price of 390p-a-share.
Wise issued 994.6 million shares to the stock market and has taken advantage of new listing rules to create class “A” and class “B” shares.
The class “B” shares hold nine votes per share and allow the founders to hold a greater level of power when it comes to voting on company matters, compared with the one vote per share afforded to those with “A” shares.
The additional powers for the “B” shares will last for five years and are non-transferable.
Financial institutions and the Government will hope that the listing is a sign that the UK can grow its credentials as a tech hub and woo more tech firms to its stock exchange.
Julia Hoggett, chief executive of the London Stock Exchange said the direct listing “demonstrates the flexibility of the London market… and help ensure the UK’s public markets remain attractive for both high-growth innovative businesses and for a broad range of investors.”
She added: “Wise joining the Main Market through its Direct Listing demonstrates that global tech companies can build, scale-up and go public in London.
“London offers access to deep pools of international capital, alongside high standards of corporate governance and effective regulations.”
Zoe Stabler, of personal finance comparison site finder.com, pointed out the valuation makes Wise 18% more valuable than Western Union and more than 10 times bigger than MoneyGram – although almost 97% smaller than PayPal.
She added: “Wise was valued at £5 billion in July 2020, so they will be pleased to have launched well over this valuation, especially as there were concerns over the dual class share structure they opted for.”