In news out today (5 June), Wise (LSE:WISE) announced that it’s planning to list its shares in the US. The move would see the US listing become the company’s main one while maintaining a secondary listing on the London Stock Exchange (LSE). The news came as a surprise to some, but the stock rocketed over 12% higher on the news. Here’s what I think happens next.
Implications for the market
For the LSE in general, it’s not great news. It’s yet another company shifting to the US. For several years, there have been worries about low valuations and weak liquidity in UK markets, which has meant several management teams have decided to look across the pond.
Some companies have moved to the US with the primary listing and then decided to cancel the UK listing altogether. There are no immediate signs that Wise will do the same, but it’s probably a thought in the back of some investors’ minds.
In terms of the specifics why Wise has chosen to move, the CEO commented that “we believe the addition of a primary US listing would help us accelerate our mission and bring substantial strategic and capital markets benefits to Wise and our owners”. He also noted the US is “the biggest market opportunity in the world for our products”.
Good for Wise
The immediate reaction to the share price clearly shows positive sentiment. Firstly, being listed in the US will allow retail investors there to more readily buy the stock. Yet more than that, the listing will create more publicity around the business. If Wise can then gain more traction and scale, it will grow revenue and profits. This, in turn, should help the share price of the UK listing rally.
With the second listing, Wise will be able to raise more capital. This can be used to develop new products and enhance the offering to clients. I see this as a good thing, as it means the business does not have to use debt or even retained earnings to fuel its growth.
Some concerns
As a fintech company, Wise faces a lot of competition. Not only are there other disrupters in this space, but traditional banks are also trying to regain some of the lost market share. Therefore, Wise has to try to stay ahead of the game; otherwise, customers could be easily lost.
Another factor is valuation. With a price-to-earnings ratio of 97, it’s certainly not cheap! The stock is up 45% over the past year and has hit fresh 52-week highs this morning.
I think the optimism around the jump today should ease off, but when I look at the stock with a long-term lens, I think the move to the US could be a smart move. I’m putting it on my watchlist to consider buying once the dust settles on this news.
