MoneyWeek

Wise IPO

Key facts

IPO date: 7th July 2021

Stock market debut: London Stock Exchange

Ticker symbol: WISE

Offer price: £8 per share

Shares offered: No new shares issued as the IPO was a direct listing

2020 figures: Revenue of £421 million in 2020 and the firm has been profitable since 2017.

Company Overview

Wise was founded in 2010 and is one of the UK’s biggest fintech firms. The firm focuses on online money transfer services and has recently branched out by offering customer and business accounts. The firm was founded by two Estonians living in the UK who were shocked by how costly it was to transfer money overseas.

Wise operates in 11 countries and has over 10 million consumers worldwide. The firm generates revenue by charging a fee on the amount converted in the cross-currency transfer. In 2019, the firm processed £42 billion in cross-currency transfers. According to the firm, its transfers are seven times cheaper than transfers by banks or foreign exchange dealers. Wise has been profitable since 2017, unlike some of its competitors. The group made a pre-tax profit of £41 million in the 12 months to March 31st with revenues of £421 million, according to the Financial Times.

Wise has a number of competitors which include Western Union, MoneyGram, WorldRemit, Remitly and PayPal among others. According to Cityindex it also faces competition within the online banking space with firms such as Monzo and Revolut growing rapidly.

IPO Day

The payments firm began trading at £8 per share in its direct listing. In direct listings companies do not create new shares or raise any fresh capital. Instead, the existing private owners sell their ownership in the company. This means the price was determined through an extended three-hour opening auction, rather than through a traditional book-building process.

The stock gained more than 10% during the day to close at £8.88. The closing share price gives the firm a market cap of £8.8 billion. This means Wise is London’s biggest float of the year and the city’s largest-ever tech listing. This was above analyst expectations of a £7 billion valuation.

Post-IPO Performance

Wise’s share price has increased over the week. On 9th July, the share price reached a high of £10.29. Since then the price has levelled off and is trading steadily around £9.60, well above its offer price.

Google Finance

The future for Wise

In its first week as a public firm, Wise has demonstrated significant potential with its strong valuation and rising share price.

However, the firm has numerous competitors in the payment space which could signal that this industry has lower barriers to entry and can charge similar lower fees. Wise may have to pursue other ways of staying competitive either with regards to price or product/service. It is also worth noting that since Wise has had years of consistent profitability unlike some of its competitors such as Monzo and therefore they may be able to invest more capital into development of their business and products.

This IPO certainly proved to be a success for the City of London as it demonstrates that the capital is an attractive place for fintech firms to list. The CEO of the London Stock Exchange, Julia Hoggett said: “Wise joining the Main Market through its direct listing demonstrates that global tech companies can build, scale-up and go public in London.” This could also encourage other tech companies to set up and list in the UK which leads to inflows of investment into the country.

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Jaanki Thakrar

Jaanki Thakrar

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