Wise (LSE:WISE) shares opened at £8 a share at 11am on Wednesday, giving the currency transfer company a market capitalisation of £8bn.
The London-based fintech firm decided to use a direct listing on the London Stock Exchange rather than a more common IPO. According to co-founder and CEO Kristo Käärman a direct listing allows for a “cheaper and more transparent way to broaden Wise’s ownership.”
Previously known as Transferwise, the currency platform was founded with a mission to transparently and cheaply move money across the world. So it’s quite fitting that it has chosen a direct listing, bypassing the major banks to go directly to its customers and investors.
Also consistent with its brand, it created a program called OwnWise that offers Wise users a chance to invest in the company and receive bonus shares.
A wise investment?
Unlike some fast-growing technology companies, Wise is a profitable business. I like that it’s been profitable since 2017. It has managed to steadily grow sales and profits.
Given its growth and size, it’s certainly no longer a start-up. It now has 10m users, moving £5bn every month. The company reckons it saves customers over £1bn a year compared to transactions made with banks.
More customers are joining every year, and currency transfers are getting cheaper and faster. Wise has demonstrated that it’s an innovative company with frequent new features. It’s also always working to reduce fees by becoming more efficient.
The question I ask myself when looking at Wise shares is: what does the future look like?
I reckon the future looks promising. Wise has a large global audience and a long runway of potential customers. According to consultancy firm McKinsey, it’s estimated that people and small-to-medium businesses transfer $10trn internationally.
Despite an encouraging outlook for the business, there are several risks to Wise shares that I’d consider.
Wise operates in a highly regulated environment. It needs to ensure it meets compliance requirements in each of the many countries that it operates in. It also needs to work hard to minimise the risk of financial crimes across its products.
Given its business of cross-border currency transfers, it’s exposed to fluctuations in foreign exchange rates. It needs to manage its liabilities carefully to ensure it can protect itself from significant currency moves.
Also, it’s worth noting that the company decided to list with a dual share structure. This gives founders more control and enhanced voting rights. It could be controversial and limit some interest from investors.
Should I buy Wise shares?
All things considered, I’ve decided not to buy Wise shares just yet. It certainly looks promising and I like its ethos, plan, and vision. However, I tend not to invest in new listings. The share price can be volatile and its price will somewhat depend on the level of hype it received in recent weeks and months.
On this occasion, I’m happy to add Wise shares to my watchlist and observe over the coming months.