News & Analysis

A Wise move? Payments company set for highest value IPO in 10 years on LSE

Andrew Saks, Wednesday, 16 June 2021

London is absolutely flourishing as a center for global technology, and in particular financial technology.

Ever since the 1970s, London's institutional electronic trading and Tier 1 banking sector has been at the forefront of global domination, its systems and infrastructure conducting the majority of transactions which power the world's economies.

Along with New York's Wall Street, London attracted talent from all over the world which has culminated in its financial sector employing 0.0009% of Europe's workforce yet producing 16% of all European Union tax receipts.

Six years ago, London overtook New York as the world's largest financial center, and 67% of all FX order flow is executed by top tier investment banking market makers on the banks of Millwall Dock in Canary Wharf.

All of this is made possible by incredibly complex technology which has all been developed in-house, along with connectivity infrastructure, points of presence that are dedicated order routing channels, and massive hosting centers like Equinix's LD4 colocation center in Slough.

Reuters, ICAP, Currenex, Hotspot FX, XTX Markets and many other electronic communication networks and non-bank market makers operate from London, and the talent base that leads the entire financial ecosystem is the most experienced in the world.

No surprise, in that case, that London Stock Exchange is the most prestigious and well respected public listing venue outside of North America, and although the NASDAQ exchange is synonymous with technology listings, London Stock Exchange is certainly becoming a close rival, and is the de facto listing venue for financial technology companies.

During the last few months, Wise, a large British payments and deliverable FX company which was formerly known as TransferWise, has been preparing its forthcoming listing on the London Stock Exchange, with estimates having ranged between £6 billion to £7 billion as a valuation once its initial public offering (IPO) is complete.

Today, however, those estimates have been absolutely smashed and Wise is looking firmly down the nose of a £9 billion IPO which would be the largest float on the London Stock Exchange in over ten years, absolutely trouncing the previous high of £3.6 billion which was achieved by Anglo-Swiss multinational commodity trading and mining company Glencore in 2011.

Established by Estonian entrepreneurs risto Kaarmann and Taavet Hinriku 11 years ago as a cheap and simple means for residents of the United Kingdom to transfer funds internationally into different currency denominations with low fees, the company handles over £5 billion worth of transactions every month and employs more than 2000 staff.

The structure of the IPO will be in the form of what is known as a Direct Listing, which is a method that is very popular among NASDAQ listed technology firms in the United States which hands power to specific shareholders rather than a one vote per share system, giving certain shareholders more voting power than others.

This type of strategy is common among Silicon Valley firms when they list their stock, and is a moot point in the less frenetic United Kingdom, however the government has succumbed, albeit reluctantly with Lord Hill having recommended that firms be allowed to enter the premium segment of the London Stock Exchange even if they use dual class share structures in his review of stock market listing rules in the early part of this year.

No actual date for the listing has been provided yet, and the listing is still subject to final approval from British regulators, however if it does go ahead, it represents a massive milestone in British fintech history and a far cry from the small startups of Islington's 'Silicon Roundabout' which stood in the shadow of the established banking giants in the middle of last decade.




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