Economic expert Kristjan Lepik tweeted that 20 years ago Estonia was a weird Eastern European country, but now $WISE, a company founded in Estonia is the biggest ever new listing in the history of London Stock Exchange. “Who would have thought?” asked Lepik rhetorically.
Rather than use an initial public offering (IPO) off its stock, Wise (previously known as Transferwise) used another option – direct listing. Wise is the first company in the history of LSE to do so. Even in the New York Stock Exchange the method has only been used by a handful of companies – Spotify, Coinbase and Slack.
Financial Times writes that the deal is being hailed as a milestone for the UK fintech sector. A direct listing allowed the company to start trading its stock without issuing any new shares. The opening price was determined through an opening auction which lasted for three hours.
Wise used a dual class share structure meaning the general public will be able to buy shares with little to no voting rights. This allows the founders and early investors such as Peter Thiel’s Valar Ventures and Richard Branson to retain voting rights.
Wise was founded ten years ago by Estonian expats living in London, Taavet Hinrikus and Kristo Käärmann. Käärmann holds a 18,8% stake in Wise which is worth around 1,5 billion pounds, Hinrikus’s 10,9% stake is worth 1,1 billion pounds. Wise’s international success has made both men Estonia’s first billionaires.
“Wise is used to challenging convention, and this listing is no exception. A direct listing allows us a cheaper and more transparent way to broaden Wise’s ownership, aligned with our mission,” said co-founder and CEO Käärmann in a statement given to Reuters.
Wise’s core business has always been the same, it offers cheap and fast international money transfers without hidden fees. Their service has been used by over ten million customers. Every month Wise helps to transfer over seven billion US dollars globally. Thanks to the low fees every year their customers save over 1,5 billion USD. As of the writing of this article there are exactly 55 currencies that Wise supports.
Wise’s start can be traced back to 2008, writes weekly Äripäev, when Käärmann was working for Deloitte as a manager. He got a Christmas bonus of around 10 000 British pounds and as he saw that Estonian banks were paying higher interest rates back then he wanted to transfer the money to his account in Estonia. A week after doing so he discovered his bank in the United Kingdom took a hefty fee to convert British pounds into euros and he lost around 500 pounds in the process.
Soon he realised the exchange rates displayed in Google, Bloomberg, Reuters and elsewhere were not the ones that the banks used. With the help of his friend, Skype’s first employee, Taavet Hinrikus he set up a system that at first they used themselves and later allowed some friends to join.
Wise has 14 offices across the globe, including Tallinn, London, Singapore, New York and Sao Paulo. Almost half of the 2,200 workforce work from the Tallinn office.
Over the years Wise has used non-traditional PR tactics to make themselves seen, for example they have held a parade in London to draw attention to the fees that traditional banks take when you try to send money abroad. When the company expanded to the United States of America Hinrikus and Käärmann ran around Wall Street in New York City in their underwear. The stunt’s message was that the founders and company had nothing to hide.
In April this year Wise announced that they will give a share of the company to 2000 of their customers with no strings attached. Yet another thing that distinguishes Wise is that they publicly display to their customers if some of their competing companies will offer the same transaction with even cheaper fees.
For example if you’d like to transfer 1000 euros into Chinese Yuan (CNY) the cheapest option that Wise customers are offered is to use their competitor Remitly, doing so will save you 19,97 CNY or around 2,60 euros. For these kinds of situations Wise hopes that their customers will still choose them as they can transfer money in mere seconds.
The author of this text, just as any other supportive Estonian, has bought Wise shares.
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