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Fintech Wise Planning Direct Listing

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Wise, the fintech formally known as TransferWise, has announced its intention to direct list on the London Stock Exchange (LSE). According to estimates, the company could list at an evaluation somewhere in the $6 billion to $7 billion range. Foregoing the traditional Initial Public Offering route, Wise’s direct listing will be the largest ever on the LSE. The listing is expected to be finalized by July 5, with the company aiming for an estimated free float of 25 percent.

Low-fee Money Transfer Alternative 

Founded in 2011, Wise specializes in the cross-border transfer of money. While traditional banks charge high transaction costs and conversation fees, Wise entered the market and offered a low fee alternative. With a transparent pricing structure, Wise has proven to be a profitable company in a very competitive sector dominated by big players like Western Union and MoneyGram. The company’s revenue grew from $422 million to $586 million in its most recent fiscal year. In any given month, 10 million customers will send over $7 billion dollars worth of money within the Wise system.

In addition to money transfers, Wise has also branched out to offer additional services over the past several years. Wise has recently added the capacity for accounts to hold 56 different currencies. By providing this option, Wise attracted a swathe of new users who were looking to take advantage of this feature. This feature was useful for groups like freelancers who worked with clients in other regions or were constantly moving around to new countries. Additionally, the company also began to offer Wise Business. While Wise was is not registered as a bank in the United Kingdom, the company was able to provide accounts to business owners and issue Business Debit Mastercards. However, due to the status of the company, the company is not insured through the Financial Services Compensation Scheme.

The Decision to Direct List 

The move to direct list came as a bit of a surprise to potential investors, as most companies going public tend to choose the IPO route. The main difference between the two options is that in an IPO, new shares are created and sold on the open market. In contrast, no new shares are created in a direct listing, and only existing, outstanding shares are sold.  Company’s often choose to go the direct listing route when they do not feel that raising additional money is necessary. As a company that has been profitable since 2017, raising cash for growth is not the main priority for Wise.

Recent names that have chosen the direct listing route include Spotify, Coinbase and Slack. The company is planning on introducing a dual-class share structure, meaning that existing shareholders will have more voting power in the short term. The list of existing shareholders includes employees of the company as well as high profile investors such as founder of Virgin Group Richard Branson and PayPal co-founder Peter Thiel. The move was also surprising because the company had originally planned for an IPO in Janurary of 2020.

Another surprising aspect of this news is the fact the company is choosing to list on the LSE. Bringing more technology investment into the country has been a stated goal of the British government, and Wise’s decision is a step in the right direction for the country’s fintech sector. 

Baggio has been an investor in the technology space for over half a decade. He uses the perspectives gained from his work experience in the private, public, and non-profit sectors to guide his investment strategy, with a specific interest in the potential of emerging disruptive technologies.