Latest news with #Käärmann
Telegraph
4 days ago
- Business
- Telegraph
London's demise is now terminal
The stock market float of payment giant Wise in 2021 was hailed as a rare yet spectacular coup for the City of London. Commentators, including myself, hailed it as proof that the Square Mile could continue to attract the best companies on the planet and retain its status as one of the pre-eminent financial centres. Here was one of Europe's brightest technology prospects, led by two swashbuckling entrepreneurs in Kristo Käärmann and Taavet Hinrikus, choosing the capital to be the beating heart of their rapidly expanding financial empire. Armed with a pledge to shake up the cross-border currency exchange market that had long been dominated by a cosy club of high street banks, London had managed to woo the sort of bona fide disruptors that ministers were convinced Britain could become a beacon for. The pair scored further points for shunning New York at a time when Wall Street was increasingly becoming the natural home of choice for a generation of technology starlets. London was in desperate need of a boost and not just because several recent high-profile floats including that of takeaway app Deliveroo had bombed. Wise was everything the City needed if it was to remain relevant in the 21st century. The company's £9bn valuation – a record for a UK technology firm – was the icing on the cake for London's cheerleaders. By the same token then, it is impossible to see Wise's decision to switch its main stock market quote to the Big Apple less than four years later as anything other than a devastating blow to London's long-term prospects as a leading hub for international capital. Indeed, with time it may come to be seen as fatal – the moment when the capital's malaise went from being temporary to terminal. London Stock Exchange officials and ministers have been forced to stand and watch helplessly as a series of blue-chip companies have either turned their back on Paternoster Square entirely, or relegated the UK to secondary listing status. It is a crisis that investment minister Baroness Gustafsson must quickly find answers to. Wise's bombshell announcement clashes awkwardly with reports that the celebrated technology executive-turned-government appointee is planning to relaunch the Office for Investment at a private event on Thursday. The shadow of a company whose valuation has ballooned to £12bn since it went public now looms uncomfortably large over Gustafsson's attempts to revamp the Whitehall investment hub with the hope of securing hundreds of billions of capital flows into the UK in the coming years, according to Sky News. Coming hours after Cobalt Holdings, a commodities trader, pulled a planned $230m (£169m) listing in London, Gustafsson must be getting an unfortunate sense of déjà vu. Labour's flagship investment summit convened just days after her appointment in October was mired in a comedy of errors. Foreign business leaders shunned the event and organisers inadvertently revealed the contact details of over 100 guests. Meanwhile, questions were understandably asked about the wisdom of appointing someone to promote overseas investment who only weeks earlier had sold Darktrace, the cyber-security specialist she co-founded with the late tech tycoon Mike Lynch, to a US private equity outfit in a £4.3bn deal. Similarly, Labour has to confront the reality that its attack on the rich is another reason for people to leave, as shadow business secretary Andrew Griffith was quick to point out. Reforms such as the pensions bill, which makes it easier to invest in equities help counter the gloom, but they risk being for nothing if the Government's war on wealth continues. The decision of construction equipment rental giant Ashtead to elope across the pond in December, was perfectly legitimate given that the US is by far its biggest market, but it was the sixth constituent of the FTSE 100 to have disappeared overseas in a matter of a few, short years. It joins others including Flutter, owner of Paddy Power, building materials supplier CRH and tour operator Tui in quitting London. The hope is that this exodus can still be reversed. But the risk is that it suddenly escalates, becoming an unstoppable stampede as all-but the most entrenched boards scramble to avoid being the last one to make their escape. Predictably, Wise is at great pains to ensure the move isn't seen as a snub to the City, yet it is hard to escape the impression of an organisation that doth protest too much. 'We believe the addition of a primary US listing would help us accelerate our mission and bring substantial strategic and capital market benefits to Wise and our owners,' Wise said. The real giveaway, however, may be in the statement that such a shift would give it 'better access to the world's deepest and most liquid capital market'. Ditto the claim that the US was 'the biggest market opportunity in the world'. Yes, the company is retaining a listing in London but the direction of travel is now firmly set. Who would bet on that still being the case in a couple of years' time? The news that top shareholders have been pushing for a move to the US despite a 36pc leap in its share price in the last 12 months alone will do little to dampen concerns about London's prospects – many of those that have gone before Wise have blamed weak valuations Having helped turn Darktrace into a star of Britain's tech industry, Wise's volte-face will be particularly painful for Gustafsson. When she was appointed last year, Sir Keir Starmer hailed her as 'an accomplished entrepreneur who brings invaluable experience to the role'. The expectation was that she would spearhead Britain's attempts to cultivate its own answer to Silicon Valley. That might be easier if doubts about London were confined to one or two overarching areas. Yet they are so abundant, ranging from low valuations and limited levels of trading to more generous executive pay and stifling governance that one wonders whether it is too late to turn the tide.
Reuters
5 days ago
- Business
- Reuters
Breakingviews - Wise's US listing switch lacks financial wisdom
LONDON, June 5 (Reuters Breakingviews) - Wise (WISEa.L), opens new tab helps customers exchange money more cheaply, transparently and, well, wisely. But the $15 billion firm's plan, opens new tab to shift its primary listing to New York from London seems less clever. CEO, co-founder and largest shareholder Kristo Käärmann wants to tap deeper pools of liquidity and attract more American investors. Yet for a company already trading at a premium valuation, the move raises more questions than it answers. Käärmann's case rests on two key points. Wise's shares are thinly traded in London, meaning investors risk moving the market by offloading stock in large volumes. Second, a U.S. listing would boost the company's appeal to American investors and even customers. There's truth to both. The total daily value of Wise's trading volume has averaged about half of $4 billion American peer Remitly Global over the past two years according to a Breakingviews analysis of LSEG data, even though the London-listed group is much bigger. And some domestic-focused U.S. investors prefer to hold stocks listed in their home market. Yet Wise needn't cross the Atlantic Ocean to boost liquidity. One possible obstacle to winning more investors at home is the company's quirky governance, where Class B owners have nine votes per share. The effect is that Käärmann has a tight grip on the company despite owning less than 20% of the tradable Class A stock, according to LSEG data. The alternative to hopping across the pond would be to get rid of some of the CEO's special rights, which could in turn smooth Wise's entry into Britain's main stock benchmark, the FTSE 100 Index (.FTSE), opens new tab. That would boost liquidity to U.S. levels: LSEG research, opens new tab found that, relative to the volume of companies' tradable shares, FTSE 100 trading levels were slightly higher than in the S&P 500 Index (.SPX), opens new tab in 2022. Nor is the United States Wise's biggest geography, as it was for other listing switchers like CRH and Ferguson Enterprises. For Käärmann's company, the American market comes third after Europe and Asia, making up 20% of group revenue. As for brand awareness, switching trading venue seems like a strange way to gain publicity compared with a marketing campaign. Moving the listing also brings possible downside. Wise trades at 29 times consensus 2027 earnings – beating Remitly, Block, PayPal and others. Other metrics tell the same story: there's no evidence of a valuation penalty because of the company's UK trading venue. That means Käärmann has much to lose if the company ends up as one of the many 'orphaned' pond-hoppers, which switch listing but never quite catch fire in the U.S. market. Research by think tank New Financial earlier this year found that just 44% of the 16 European companies that had moved across the Atlantic subsequently beat the performance of their home continent. The one consolidation is that this doesn't seem to be about extra CEO pay: Käärmann, as a major shareholder, has taken a roughly 200,000-pound ($270,000) cash salary in recent years, which is tiny compared to most bosses. There are no plans to raise that, according to a person familiar with the matter. But for investors, Wise's shift looks like a poor financial trade-off. Follow Karen Kwok on LinkedIn, opens new tab and X, opens new tab.
