July 7, 2021
London-based fintech company Wise (formerly known as TransferWise) is taking a risky approach to its stock market debut on July 7, Bloomberg reports. It has decided to list its shares directly on the London Stock Exchange, rather than do an initial public offering (IPO).
The move will make Wise a publicly traded company with an expected valuation of $7 billion (£5 billion). If the valuation predictions come true, it will be one of the biggest stocks to go through a direct listing.
Wise has been a success story for a while now. Founded in 2011, it enabled transactions of over $13.4 million in its first year. Although it initially gained traction in the UK, it has since attracted international attention. This is why it’s no surprise that the company managed to turn a profit only six years after its inception. It has since rebranded from “TransferWise” and expanded its offering.
Why Is This Important?
Wise’s direct listing approach follows in the footsteps of companies such as Spotify, Slack, and Coinbase, which have had successful introductions to the market with this method.
Compared to IPO, doing a direct listing can be very cost-efficient, but it also comes with risks as there is no guarantee that the shares will sell and what their selling price will be. An IPO requires the creation of new shares and setting a price for them (a.k.a. paying intermediaries to do it), but a direct listing doesn’t create new shares, and the existing shares are sold directly to the public, without any intermediaries.
Direct listings are rare for the UK stock market, but they have become an increasingly embraced practice on the New York Stock Exchange (NYSE). Following Brexit, London is striving to become a more attractive tech destination. Wise’s choice to go with a direct listing is a milestone for London’s stock market, as it’s the first direct listing of a tech company there, opening the door for more companies to go public in London.
With a direct listing, the stocks are open to the general public. So, if one feels like purchasing Wise stock, they should consult their robo advisor (and there’s a variety to choose from). The trading is expected to begin after 11:22 a.m, London time.
Prompted by the rise of cryptocurrencies, investing has become more mainstream in the past few years, and it isn’t reserved for “finance nerds” anymore. Interest has also shifted to “regular” stocks as well, with people buying stocks from huge companies like Apple, Tesla, and Zoom, or even investing in a sector, such as buying TaaS stocks.