London-based fintech company, Wise (formerly known as Transferwise) last month announced its plans to go public on the London Stock Exchange. The company also said it will go through a direct listing instead of the traditional IPO path.
Going public through a direct listing is a daring move as it doesn’t allow companies to raise additional capital. In the United States, only a few companies such as Spotify, Slack, and Coinbase opted for a direct listing. IPOs may be more appealing to many companies because of the capital involved. However, tech founders and venture capitalists say direct listings can be a better approach to the stock market as it does not require underwriting fees and avoids mispricing of shares.
The money-transfer company was last privately valued at $5 billion in a secondary share sale. With a direct listing in view, there is no formal pricing process as the share price will be determined by the market once it goes public.
Wise is also making moves towards introducing a dual-class share structure which will allow its existing shareholders to get more votes per share for some time. According to the company’s prospectus, the first trades are expected to commence shortly after 11:22 a.m. London time.
Wise’s listing is good news to London as it hopes the move will attract more big tech companies since Britain’s departure from the European Union (EU). The company says its market debut will be the first direct listing of a tech company on the London Stock Exchange.
Wise is an international cross-border money transfer platform that allows its users to send and receive money across national borders. It also features traditional retail banks and charges high foreign exchange and foreign transaction fees. Although its fees are quite high, Wise is still a better option compared to other alternatives such as MoneyGram and Western Union.
Since its founding in 2010, Wise has grown beyond measures. In its most recent financial year, its revenue grew from $422 million (£303 million) to $580 million (£41 million). The company says it has 10 million users who process nearly $7 billion (£5 billion) in cross-border transactions per month.
How does Wise work?
Users will have to pay money into their Wise account using a traditional bank transfer or a debit card. Once that’s been done, they can transfer the money in another currency to the recipient’s bank account.