Read for 4 minutes (Reuters) – LONDON (Reuters) – Other software startups looking to go public in the coming months, the bankers overseeing those deals, and post-Brexit London have all benefited from Wise’s record-breaking direct listing. In this illustration shot on June 18, 2021, the Wise logo is visible on a smartphone in front of a displayed stock graph. Illustration by REUTERS/Dado Ruvic The dismal post-IPO trading of Deliveroo and Alphawave revealed a deterioration in opinion towards technology firm IPOs in the British capital. However, Wise’s 7.9 billion pound ($10.9 billion) valuation and subsequent market performance in London’s first-ever direct offering appears to have allayed fears that the city isn’t as tech-friendly as New York or Amsterdam. “London has the potential to be a global fintech hub, and someone like Wise going public gives other companies alternatives,” said Rosh Wijayarathna, managing director of Silicon Valley Bank’s corporate banking division. According to Reuters, Wijayarathna, whose bank supplied capital for many of the companies that have listed in London, there are 10 to 12 tech companies intending to list on the London Stock Exchange in the next year or so, including numerous fintech companies. “Not only do you have a variety of possibilities, but you also have the ability to dictate valuations that you won’t find anywhere else,” Wijayarathna noted. Wise, a cross-border payments startup formerly known as TransferWise, debuted on the London Stock Exchange on Wednesday, becoming the largest tech company to do so. “The Wise listing has been a major success and very positive for the London market in terms of establishing it as a great listing location for high-growth tech and fintech firms,” said James Fleming, Citi’s UK and Ireland co-head of banking, capital markets, and advice. Instead of a traditional IPO, the Wise deal was structured as a sale of existing shares, known as a direct listing, which might pave the way for others. Click here for an interactive version: tmsnrt.rs/2TF6n1L Checkout.com and WorldRemit, both based in the United Kingdom, and Klarna, the largest tech unicorn in Europe, are among the companies that bankers predict to go public in the next 12-18 months. While bankers are reluctant to disclose names, they expect companies to pursue an IPO, direct listing, or merger with a special purpose acquisition vehicle (SPAC) in the coming months, with some as early as September. However, while Wise has sparked excitement, potential market newcomers and their bankers will be watching closely to see how Wise shares trade following their first surge. A dramatic drop in the stock market could easily erode investor confidence and stymie London’s listing plans. Wise shares began trading at 800 pence and had increased to 960 pence by 1530 GMT on Thursday. Professor John Colley, Associate Dean of Warwick Business School, is skeptical of the valuation implied by such pricing, particularly considering the severe rivalry in the payments industry. Wise’s stock was trading at around 20 times earnings as a proportion of sales, according to Colley. “It’s the kind of valuation you’d put on a Google or an Amazon,” Colley explained. According to sources close to the Wise sale, an 8 billion pound valuation equal to 13 times predicted earnings for 2022, which was in line with its payments rivals, according to analyst projections supplied to investors before the listing. Regardless of how Wise shares move, such a significant IPO will serve as a beacon for other companies, said to Keith Grose, head of international operations at U.S. fintech Plaid. “These types of highly publicized market success stories serve as an encouragement and example to the next generation of entrepreneurs and founders,” Grose, whose company is expanding into the United Kingdom, noted. Abhinav Ramnarayan contributed reporting, and Sujata Rao and Alexander Smith edited the piece./n
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