A wise transfer? Itemizing in London may open fintech floodgates

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Wise’s record-breaking direct listing is a relief for other tech companies looking to go public in the coming months, the bankers who manage those deals, and for the post-Brexit London Brexit.

The catastrophic IPO of Deliveroo (ROO.L) and Alphawave (AWE.L) after the IPO had raised awareness of the IPOs of technology companies in the British capital.

But Wise’s £ 7.9 billion ($ 10.9 billion) valuation and subsequent market performance on London’s first direct listing should allay concerns that it’s not as open-minded to tech companies as places like New York or Amsterdam.

“London has the potential to become a global fintech hub, and a listing like Wise gives options to other companies,” said Rosh Wijayarathna, managing director of corporate banking for Silicon Valley Bank.

Wijayarathna, whose bank financed many of the London-listed companies, told Reuters that 10 to 12 tech companies, including several fintechs, plan to be listed on the London Stock Exchange in the next year or so.

“Not only do you have the flexibility of options, but the kind of reviews you can get elsewhere,” added Wijayarathna.

Wise (WISEa.L), a cross-border payments company formerly known as TransferWise, made its market debut on Wednesday and became the largest tech company listed on the London Stock Exchange.

“Wise’s listing was a huge success and very positive for the London market as it has proven to be a great listing location for high growth tech and fintech companies,” said James Fleming, Citi Co-Head of Banking, Capital Markets and Advisory in the UK and Ireland said.

The Wise deal was structured as a sale of existing shares known as a direct listing, rather than a traditional IPO that may pave a path for others to follow.

WORD TO THE WISE

Companies like UK-based Checkout.com and WorldRemit, as well as Swedish “buy now, pay later” giant Klarna, Europe’s biggest tech unicorn, are among the bankers considering going public in the next 12 to 18 months.

And while bankers don’t want to name names, they expect companies to consider going public, direct listing, or merging with a special purpose vehicle (SPAC), some as early as September.

But while Wise has raised hopes, potential market debutants and their bankers will first watch closely as Wise stocks trade after their first jump. A sharp fall in the share price could easily undermine confidence and undermine London’s listing ambitions.

Wise shares began trading at 800p and had risen to 960p by 1530 GMT on Thursday.

Professor John Colley, Associate Dean at Warwick Business School, has doubts about the valuation that would result from such prices, especially given the fierce competition in the payments sector.

Colley found that the price of Wise stock as a multiple of sales was roughly 20 times earnings.

“That’s the kind of rating you would give … a Google or an Amazon,” said Colley.

However, sources close to the Wise deal, citing analyst estimates shared with investors prior to listing, said a £ 8 billion valuation was 13 times projected earnings for 2022, which is the same as that of payment companies is comparable.

Regardless of how Wise shares trade, such a large listing will be a signpost for other companies, said Keith Grose, director of international operations at US fintech Plaid.

“These kinds of very public success stories within a market act as an incentive and role model for the next generation of entrepreneurs and founders,” added Grose, whose company is expanding into the UK.