Fintech Wise in talks with regulators over direct UK listing

Wise, the fintech formerly known as TransferWise, is in discussions with British financial regulators about going public via a direct listing, in what would be a landmark deal for the UK market.

Wise is aiming to list in June and has been discussing the mechanics of a direct listing with the Financial Conduct Authority, according to people close to the company.

One of the people said the timing and structure of the deal were not yet finalised, but that the company had settled on a direct listing in London as its preferred route, after it hired banks to explore various options for going public last year.

The decision will be a boost for the London stock market and ministers after the high profile flop of Deliveroo’s initial public offering at the end of last month.

The UK government has been keen to attract more fast-growing tech businesses, with a review led by former EU financial services commissioner, Jonathan Hill, calling for a range of reforms to loosen listing rules.

Unlike Deliveroo, which has no operations in the US, and Darktrace whose shareholder Mike Lynch is fighting extradition to the US on fraud charges, investors say Wise could have been more easily attracted to a New York listing given its international leadership, global customer base and cross-border platform.

TransferWise was launched by Estonian duo Kristo Kaarmann and Taavet Hinrikus in 2011, offering low-cost international money transfers for retail customers, but has recently focused on attracting business clients and moving into more sophisticated banking services. It was renamed Wise in February in an effort to highlight the shift beyond simple money transfers.

The company reported revenues of £303m and pre-tax profit of £20.4m in the 12 months to March 2020, the most recent year for which data are available, and it has previously said that profits continued to grow through 2020.

Wise was most recently valued at $5bn in a secondary sale last July — equivalent to around £3.9bn at the time of the deal or £3.6bn at current exchange rates. However, shares in many payments companies have surged over the past year, and one existing investor said they were hoping for a valuation as high as $10bn.

Direct listings allow existing investors to sell shares and provide a relatively cheap way for companies to join the stock market without raising any new capital. They have become increasingly popular in the US in recent years, following high profile listings by tech companies such as Spotify, Slack and Roblox.

In an interview with the Financial Times late last year, Wise chief financial officer Matt Briers said “the traditional IPO has been a pretty boring or stale product for a while”. He added that “the direct listings space is quite interesting”, but stressed there had only been a few successful examples.

The FCA said: “We do not comment on individual cases but we assess all listing applications carefully and constructively with the applicant in line with a strict set of eligibility criteria. This is to ensure they meet the required listing standards and to avoid investor harm.”

The regulator said in its submission to the Hill review this year that “consideration should be given to ensure the UK regime is flexible enough to ensure these routes to market are available to companies in London as well.”

The London Stock Exchange has a long precedent of allowing companies to be “introduced” without raising capital, but Wise would be the largest company to do so without already being listed in another market or being separated from an existing business since Old Mutual, the investment group, in 1999.

Wise declined to comment.