Wise’s listing gives the London stock market a boost

F.OR A FINTECH Wise (formerly TransferWise) had a refreshingly analog birth. Kristo Kaarmann and Taavet Hinrikus, two Estonians living in London, met at a party in 2007. Mr. Hinrikus was paid in Estonian kronor, which he exchanged for pounds every month; Mr. Kaarmann converted his pound sterling into kroner to pay his home mortgage. Both were fed up with bank charges. So they came up with a workaround. Every month, Mr Kaarmann topped up Mr Hinrikus’ UK account, and Mr Hinrikus did the same for Mr Kaarmann’s Estonian, fixing the amounts at the mid-market rate – free of charge, of course.

The company they founded in 2011 to offer similar services to others now has 10 million customers. On July 7th, it was listed on the London Stock Exchange (LSE), with an initial valuation of £ 8 billion ($ 11 billion). In keeping with a company looking to eliminate transaction fees, it did so without going public (initial public offering), thereby avoiding the high fees charged by banks for selling newly minted stocks to institutional investors. Such direct listings are becoming more common among tech companies in America: Spotify, Slack, Palantir, and Coinbase have all used them in recent years. But Wise is the only company that has completed one in the City of London other than that LSE self.

Wise’s rating will have pleased its founders, who have more than doubled it in the past 12 months. City managers whose income depends on London listings should also breathe a sigh of relief. Earlier this year, Deliveroo, an eight-year-old grocery delivery company, joined his initial public offering. Many of the city’s largest fund managers refused to attend, and the share price fell 26% on the first day of trading. The debacle raised concerns that the UK stock market would not be welcoming enough to the tech companies that will be the stars of this century.

The warm welcome from Wise is, in part, a sign of greater confidence in its business model. It’s been making profits since 2017, which Deliveroo still hasn’t managed to do. No awkward questions hang about the employment status of its workers; Deliveroos initial public offering The documentation contained warnings of legal investigations in the UK, France, the Netherlands and Spain. In contrast to the posting of drivers with groceries, Wise’s business model is extremely scalable. And the path to growth is clear. Although it was 54 billion in the last fiscal year, it has now expanded to include small and medium-sized enterprises that move £ 7 trillion across borders every year.

Still, the successful listing will raise the city’s hopes for more. In an agreement that is customary for tech founders, each share in Mr. Kaarmann grants him nine votes for the next five years for each of the owners of the LSE. Such two-class structures have been criticized in the past. But when city investors were offered stakes in a profitable, fast-growing company, all of those concerns seemed to be resolved. â– 

This article appeared in the United Kingdom section of the print version under the heading “Live Broadcast”