London leans into fintech to help secure post-Brexit floats

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LONDON, July 6 (Reuters) – Britain’s future as a fintech hub in the wake of Brexit faces a crucial test this week with the company’s London Stock Exchange listing. Wise cross-border payments (IPO-WISE.L).

A thriving fintech sector is seen as a way for the UK capital to maintain its position as a leading global financial center in the aftermath of Brexit and the government has pushed for rules to encourage public listings.

Now Wise, which started life as Transferwise, is due to complete a rare direct listing on Wednesday at a valuation of 5-6 billion pounds ($6.9-8.3 billion), sources told Reuters .

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Its IPO is set to cap a record year for London listings and could pave the way for several other fast-growing UK fintech companies, a dozen investors, entrepreneurs and developers told Reuters. experts.

“Whether other companies choose to follow in Wise’s footsteps and decide to sign up will depend on its success when it hits the market,” said Sarah Kocianski, head of research at fintech consultancy 11: FS, adding that an “old guard” of fintechs are maturing and looking for the best way to cash in.

Others rising through the ranks are companies such as London-based Revolut and payments company Checkout.com, which have raised hundreds of millions of dollars from private investors at increasingly sky-high valuations. .

A spokeswoman declined to comment on Wise’s listing, whose growth has followed the UK fintech’s expansion, which has been backed by both regulators and governments.

Co-founded by Estonian friends Kristo Käärmann and Taavet Hinrikus, Wise quickly became one of Europe’s most prominent fintech companies. It has been profitable since 2017 and now serves 10 million customers worldwide.

London fintech firms raised $4.5 billion from investors in 2020, up from $185 million when Wise launched in 2011, according to Dealroom data provided by the City of London promotions agency , London & Partners.

“We’ve seen a host of fintech and financial services companies emerge in the UK since 2015 when they (Wise) first became popular, and I think Wise’s list will give it even more momentum,” said Howard Womersley Smith, a fintech and data attorney. to Reed Smith, said of the sector.

“It shows the way for fintech entrepreneurs,” he added.

OBSTACLES

Investors and entrepreneurs note that even if the Wise List is a success, several hurdles await London, including the impact Brexit could have on recruitment and other long-standing issues that have plagued UK tech.

“European workers seem less keen on moving to London for work,” said Ollie Purdue, partner at global startup venture capital firm Antler. “This is due both to the Brexit difficulties, combined with the massive efforts of other nations to boost their appeal.”

So far, several tech companies have listed for London in 2021, pushing global initial public offering (IPO) volumes to their highest levels on record.

But performance was mixed, with shares of food delivery app Deliveroo (ROO.L) falling 30% on its first trading day.

Deliveroo’s dismal start has raised the possibility that UK fund managers aren’t as enthusiastic as their US counterparts about tech companies with huge valuations and power concentrated in the hands of the founder.

Wise aims to allay any concerns with a direct listing allowing investors to decide on valuation, while also opting for a two-class share structure, with enhanced voting rights open to all early-stage investors and not just the founders.

“Let’s hope that Wise’s debut is the first in a long series and that the momentum follows. However, we cannot get carried away… We need to lay a better foundation and create the IPO environment that these local superstars deserve,” said Richard Anton, managing partner of venture capital fund Oxx.

($1 = 0.7222 pounds)

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Reporting by Abhinav Ramnarayan and Anna Irrera in London; Editing by Alexander Smith

Our standards: The Thomson Reuters Trust Principles.

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