Industry News

Wise: The Journey of a FinTech Unicorn

August 16, 2021

Wise is a financial technology company that allows for the international transfer of money, and is now the London Stock Exchange's biggest ever tech listing.

Industry News

Wise: The Journey of a FinTech Unicorn

August 12, 2021

Wise — formerly known as TransferWise — is a financial technology company that allows for the easy international transfer of money, as well as the purchase of Bitcoin and similar offerings. It is one of Britain’s biggest and best-known FinTech unicorns, with profits of £30.9million this year.

Last month, Wise made the decision to float on the London Stock Exchange, the biggest ever tech listing on the exchange. The company began trading at 800pence in London on July 7th, giving the company a market value of £8 billion. By the time the market closed, the trade price had increased to £8.88. This comes after a funding round in July that raised £228 million.

Wise went public via direct listing, a process that cuts out the middlemen and, unlike an IPO, offers no ‘lock-up period’ during which insiders are not immediately allowed to sell additional shares. This introduces an element of risk, as staff and senior managers are not locked into keeping their shares and could sell quickly. When asked why Wise chose not to go down the route of a traditional IPO, Chief Executive Kristi Kaarmann claimed that they are addressing a problem and finding a more transparent, cheaper way’ of going public and wanted to ‘avoid speculation around our valuation’. Many companies choose the IPO or SPAC route because they need to raise funding as part of the process, but Wise is currently in the fortunate position of not needing more funds. Instead, all shares go directly onto the Stock Exchange, where a three hour auction is held to establish the price, after which the stock begins trading.

Wise also made the unusual decision to introduce their own programme, called OwnWise, that lets users own a stake in the company. All those who participate would be entitled to receive bonus shares worth up to a maximum of £100 after12 months.

The debut is being seen as a win for the London Stock Exchange, which has been working to attract more companies to its stock market by relaxing the rules around listing. Wise’s achievement is evidence that it is possible for tech companies to succeed in the traditionally conservative market that is known for being hesitant to value tech companies at the same heights as might be expected on other exchanges, such as the US stock market. This is in spite of the controversial move to adopt a dual-class share structure that gives founders and early investors enhanced voting rights, a decision that is said to have aided in Deliveroo’s 30% plunge on their first day of trading this year.

Partially as a result of this dual-class share structure, Chief Executive Officer Kaarmann and Executive Chairman Hinrikus gained stakes worth around $2billion and $1 billion respectively. All employees also have shares, as do2,000 of Wise’s customers. This seems like a success story, both for Wise and for the London Exchange, but whether the effect can be repeated is still unknown.

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