Following in the footsteps of Deliveroo, Wise, the global payments fintech formerly known as TransferWise, looks set to issue shares on the London Stock Exchange by the end of the month.
Rather than a Wise IPO, the company is expected to go public by way of a direct listing, in a process that could see the company valued in excess of £5bn, and possibly even as high as £10bn.
Would a direct listing be a Wise choice?
A direct listing would be much cheaper than a Wise IPO, and given recent capital raising efforts the company doesn’t need to raise new funds.
Arriving at the right valuation is likely to be a tricky prospect given how recent IPOs and direct listings have gone, though it seems certain that it will be north of £5bn and potentially as high as £10bn.
At the company’s most recent fund raising round last summer, $319m worth of shares changed hands in a deal that put the valuation at around £3.6bn at current exchange rates.
The company is owned by Estonian entrepreneurs Taavet Hinrikus and Kristo Kaarmann, who set up the business in 201 to expedite payments between different countries, where costs have traditionally been quite high.
Mixed reception for IPOs in 2021
So far this year, the London market has seen a somewhat mixed reception to the various IPOs and direct listings, however it is also true to say that some of the enthusiasm has dwindled in the market on both sides of the Atlantic when it comes to IPO and SPAC valuations.
Deliveroo flopped primarily because of concerns over working practices, a lack of profits and a dual class structure for the shares, which concentrates voting power with its owners.
A Wise IPO could be different, as the company differs on the first two points - it is profitable having posted a pre-tax profit of £20.4m in the tax year to March 2020. However, Wise does have a dual-class structure, which means it wouldn’t be eligible for entry into any of the FTSE indices, with all of the kudos that would bring.
Wise still growing
The company has seen some decent growth in the last two years as it looks to move beyond simple payments for retail customers and into more sophisticated investment products, enabling its client money to earn a better return.
Wise currently offers transfers in 56 different currencies and in 2019 generated revenues of £303m.
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