British fintech Wise has hit the market. Should you invest?

Fintech company Wise – formerly known as Transferwise – listed on the stockmarket this week. Saloni Sardana looks at whether you should invest.

British fintech Wise (LSE: WISE) – formerly known as Transferwise – went public on Wednesday through a direct listing which valued the company at almost £9bn.

Wise ditched the traditional initial public offering (IPO) process and opted for a direct listing. So shares were able to start trading immediately. They opened at 800p and ended the day 10% higher at 880p.

The strong debut is a major win for the UK which has been trying to lure more tech groups to the country.

It also comes as a relief just a couple of months after Deliveroo’s mega flop IPO which was poorly received by investors due to concerns about the food delivery giant’s working practices.

The debut was closely followed by market watchers as it is one of the first UK fintechs founded in the wake of the 2008 financial crisis to go public.

As Wise took the direct listing route, the company did not raise any new funds; rather, existing shareholders, including Scottish fund manager Baillie Gifford, Tesla, and US venture-capital firm Andreessen Horowitz, sold a proportion of their shares.

The logic for this is simple. Companies that choose direct listings over IPOs as a route to go public – as Coinbase did earlier this year and Spotify did in 2018 – avoid having to pay high fees to the investment banks that normally act as underwriters in the standard IPO process.

So what is Wise?

Wise, known then as Transferwise, was launched in 2011 by Kristo Kaarmann and Taavet Hinrikus who were frustrated at how expensive it was to move money between the UK and Estonia, where both founders are from.

What began as a start-up has quickly expanded and now Wise is used by more than ten million people and businesses in 40 countries, moving more than £5bn across orders every month. The company claims to save its customers around £1bn a year compared to using a traditional bank.

One thing that distinguishes Wise from its peers is its profitability. It has been profitable since 2017 and has posted 54% compound growth over the past three years, with revenue climbing to £421m in its 2021 financial year.

This starkly differs from previous listings such as Deliveroo which was loss-making even before it launched its blockbuster IPO.

But is it all rosy, or does the company face any big risks?

The hurdles facing Wise

As lucrative as Wise is, it still faces many hurdles. It needs to make sure it meet the compliance requirements of every country it operates in, notes the Motley Fool.

“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. It has also noted that excessive volatility in currency markets could also affect its profits”, says Susannah Streeter, senior markets and investment analyst at Hargreaves Lansdown.

A bigger point of contention may be that the company has listed with a dual class structure. In other words, this gives the founders of the company greater control and enhanced voting rights, something that is likely to stir controversy.

Such a structure earned the distaste of investors during Deliveroo’s listing and contributed to a 30% drop in the food-delivery company’s shares on the first day of trading.

So should you invest?

The FT points out that Wise’s enterprise value (the total value of the business, calculated by adding the market value of a company’s equity and its net debt) is 50 times the company's forward earnings.

“That’s well ahead of the European payments sector average, even though revenue and profitability targets set out in Wise’s prospectus are towards the lower end of the peer group,” adds the FT.

Wise certainly stands out from other fintechs and companies. But it’s worth remembering that investing in new listings can be volatile, so it may be worth waiting to see how its stock price pans out.


The ten highest dividend yields in the FTSE 100
Income investing

The ten highest dividend yields in the FTSE 100

Rupert Hargreaves takes a look at the companies with the highest dividend yields in the UK’s blue-chip index
20 Apr 2023
FTSE 100 closes at another record high
FTSE 100

FTSE 100 closes at another record high

The FTSE 100 has closed at another record high, but what’s driving the index’s performance and can the rally continue?
16 Feb 2023
How to invest in ChatGPT and other AI tech changing the world
Tech stocks

How to invest in ChatGPT and other AI tech changing the world

Technology, like ChatGPT, is changing the way we live and work, and this new tool could have a huge impact on the tech industry says Dominic Frisby.
23 Jan 2023
The top ten dividend stocks in the FTSE 250
Share tips

The top ten dividend stocks in the FTSE 250

The average FTSE 250 dividend yield is around 4%, but many stocks yield much more. Rupert Hargreaves picks the best FTSE 250 stocks for income investo…
17 Jan 2023

Most Popular

June’s NS&I Premium Bond prize draw - are you this month’s millionaire?

June’s NS&I Premium Bond prize draw - are you this month’s millionaire?

Two fortunate NS&I Premium Bond winners are now millionaires. Find out here if you’re one of them.
1 Jun 2023
The best one-year fixed savings accounts - June 2023

The best one-year fixed savings accounts - June 2023

You can now earn 5% on 1 year fixed savings accounts - the best rate seen in 14 years. We have all the latest rates available now.
2 Jun 2023
The top healthcare funds to buy

The top healthcare funds to buy

Increasingly rapid progress in drugs and healthcare technology makes these trusts top tips, says Max King.
1 Jun 2023