Taavet Hinrikus (left) and Kristo Käärmann, co-founders of Wise
Digital-payments company Wise plans to go public on the London Stock Exchange in the first direct listing of a technology company, bolstering the UK in its ambition to expand as a hub for the sector.
The company is also giving its founders and employees extra voting rights for their shares for a limited time, allowing them to retain control after Wise goes public, it said in a statement on Thursday. The deal could value the company at £4bn to £5bn, Sky News reported this week, citing unidentified people familiar with the matter.
In a direct listing, a company does not raise fresh capital and existing investors can sell shares directly on the open market, without the usual lockup period restrictions in a traditional initial public offering. It also saves on underwriting fees paid to bankers and the time spent on a bookbuilding process. A reference price is assigned to the stock before trading begins rather than one being determined by investor demand.
While direct listings are uncommon in London, they have gained traction in the US with hot technology startups. The likes of cryptocurrency exchange Coinbase Global and website-hosting service Squarespace took this route to public markets in New York this year.
London is working hard to maintain its position as a major financial center in a post-Brexit world, and Wise’s listing is a big win for the UK, which wants to attract more high-growth companies in the technology realm.
The UK government is also mulling the introduction of weighted voting rights on the premium segment of the LSE, currently confined to the standard segment. Yet, some of London’s biggest investors have expressed concerns about weakening investor protections. When Deliveroo listed in March, its dual-class structure was criticised by the likes of Legal & General Investment Management, although like Wise, it is confined to the standard segment.
Wise, previously known as TransferWise, was started in 2011 when Estonian-born co-founders Taavet Hinrikus and Kristo Kaarmann grew frustrated with the high fees charged by banks on money sent from London back to their homeland. The firm has expanded its money-transfer business into new markets in Asia and now has more than 10 million customers.
Wise said its revenue grew at a compound annual rate of 54pc £421m in its latest financial year. Profit before tax for the year more than doubled to £41m compared to the prior year, it said.
Wise plans to establish a customer shareholder programme, providing customers joining as shareholders with the chance to receive bonus shares in the company, representing 5pc of the value of the stock they buy and hold for at least 12 months, capped at £100.
Goldman Sachs, Morgan Stanley, and Barclays Bank are lead finacial advisers, while Citigroup is co-adviser.