Wise Estonian founders Taavet Hinrikus and Kristo Käärmann
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British Fintech Wise IPO Creates 2 New Billionaires with $3.55 Billion

8th July 2021 | Hong Kong

British fintech and money transfer company Wise (formerly TransferWise), has IPO on London Stock Exchange (LSE) through a direct listing, creating 2 new billionaires in Estonian founders Taavet Hinrikus with $2.25 billion (18.8% of shares) and Kristo Käärmann with $1.3 billion (10.9% of shares).  Wise shares opened at £8 and rise to 10% to £8.88 on Day 1 with market value of $12 billion (7/7/21).  The direct listing was advised by Goldman Sachs and Morgan Stanley, saving costly IPO fees as Wise did not use underwriters for the IPO.  (IPO ~ Initial Public Offering)

“ British Fintech Wise IPO Creates 2 New Billionaires with $3.55 Billion “

 


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Wise Founded in 2010 by Estonians

Wise Estonian founders Taavet Hinrikus and Kristo Käärmann

Wise (formerly TransferWise) was founded in 2010 by Estonians Taavet Hinrikus and Kristo Käärmann, to make cross-border transactions at real-time exchange rate, competing with transfer giants such as Western Union.  

In FY2021, Wise moved £54.4 billion across borders, for 6 million customers active in the financial year, representing a volume CAGR of 42% between FY2019 and FY2021. Revenues increased by a CAGR of 54% over the same period, reaching £421 million in FY2021. The company saw strong growth not just at a group level but also across all geographies it operates in and with both personal and business customers. Gross margins were stable at approximately 62% throughout this period. In FY2021, Adjusted EBITDA reached £109 million, a margin of 25.8%, while cash conversion8 was 95.6%. Profit before tax for the year more than doubled to £41 million compared to the prior year. 

Wise became a public company through a direct listing in London on 7 July 2021. In contrast to a traditional IPO, a direct listing was the fairer, cheaper and more transparent way for us to broaden our ownership. 

 

Wise IPO Creates 2 New Billionaires

The IPO also turned Estonian founders Taavet Hinrikus (18.8%, $2.25 billion) and Kristo Käärmann (10.9%, $1.3 billion) into billionaires.

 

The IPO Process

NASDAQ IPO

Wise direct listing was advised by Goldman Sachs and Morgan Stanley, saving costly IPO fees as Wise did not use underwriters for the IPO.

The IPO process is long and tedious for the company’s management team, and the IPO fee cost around 1% to 8% of funds raised in the process for hiring underwriters (investment banks, advisory firms), depending on deal size, terms, listing exchange. 

There are also related IPO costs including legal team and auditors.  Example, a $100 million capital raised at IPO means a fee of $2 million to $7 million payable to the underwriters. 

 

IPO Fees – Alibaba, Facebook, Ant Group, Saudi Aramco

Alibaba Founder Jack Ma

For Alibaba listing, the total fees paid was around $300 million for $25 billion raised, representing 1.2% of funds raised.   For Facebook listing, the total fees was around $175 million for $16 billion raised, representing 1.1% of funds raised.

Should Ant Group listing in Hong Kong had gone through in late 2020, the total fees was estimated at $198 million for $17.24 billion funds raised, representing 1.1% of funds raised.  (Ant Group was planning a dual listing, raising a total of $34.4 billion in Shanghai and Hong Kong)

For Saudi Aramco listing in early 2020, the total fees was around for $29.4 billion raised, representing 0.2% of funds raised. 

 

Direct Listings

United States

In 2020, popular music company Spotify became one of the highest profile company to go public via a direct listing.  The company went public on the 3rd April 2020 on NYSE (New York Stock Exchange) without raising capital or selling new shares at $28 billion market capitlization. 

The direct listing also allowed shareholders, including employees to sell their sales without any lock-in period that is usual for the traditional IPO process.  For the listing, Spotify still hired Goldman Sachs and Morgan Stanley as advisors and Citadel Securities as designated market maker.

In December 2020, the United States Securities and Exchange Commission (SEC) have also approved direct listings on NYSE (New York Stock Exchange).

Other companies that have gone public recently, also without raising capital through direct listing are analytics company Palantir Technologies, gaming company Roblox Corp and cryptocurrency exchange Coinbase.

 

Billionaires:

IPOs




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