Wise PLC (WISE) is set to join the market on Wednesday in a way that has never been seen in London before and that will test the UK capital as Europe’s fintech hub.
Normally, companies undertake an initial public offering (IPO), where advisors decide at what price shares should be sold on the first day after consulting City institutions, in a process called bookbuild.
Wise looks to cut the middlemen and women as much as possible – just like it does with its international payments – and is set to be the first company ever to pursue a direct listing in London.
In fact, the Shoreditch-based startup, which was formerly known as TransferWise, allows customers to move money internationally without the hefty fees usually required from banks.
No new shares are created as part of a direct listing, so the existing stock will be directly offered to public investors with no intermediary to drum up interest.
It’s a cheaper process as underwriters don’t have to be paid and shares aren’t diluted.
The shares will simply receive a reference price, which is an estimated value from the stock exchange rather than a fixed IPO price, and will be all given to the exchange.
On the first three hours of the first day of admission, the LSE will hold an auction where buyers and sellers give their prices, then the stock will begin trading at around 11am. Retail investors will be able to join the action via their usual brokers.
The payments group is expected to be valued at around £7bn, with bullish forecasts going as high as £9bn.
“The WISE listing will be another test for London as a fintech hub, as the UK grapples with its post-Brexit status in an era when it has struggled to attract fast-growing companies looking to launch an IPO,” said Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown.
“In 2021 alone the company processed £54bn in payments, with users attracted by the low fee structure compared to other banking transfer services. It’s expanded from a personal peer-to-peer service to offer businesses faster payments solutions and that is an attractive feature of its growth prospects.”
“But there are plenty of risks ahead: the company has rivals snapping at its heels in the revolutionary world of payments and to stay competitive it may be forced to cut fees faster than it can reduce costs. Excessive volatility in currency markets could also affect its profits. Although the payments industry is in a state of flux, WISE is still confident that its strong brand recognition will mean demand for shares will be high when trading begins,” she added.