Unlock the Editor’s Digest for free
Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.
Wise believes in “money without borders”. But the British fintech — which specialises in international transfers — reckons equity investors are much more constrained.
Wise plans to transfer its primary listing to a US exchange, it said on Thursday. It hopes a larger, more liquid capital market will boost its valuation, and greater exposure will make it easier to attract US customers.
For London’s third-largest listed tech group, with a £11.5bn market capitalisation, to switch this way will reignite the debate over whether the UK market is trapped in a downward spiral. It is also likely to be of little benefit to Wise itself.
There is little evidence that moving to the US actually helps most companies over the long term. Institutions there already have easy access to foreign stocks, and are the largest group of shareholders in most FTSE 100 companies. More money coalesces around US indices, but Wise is not initially expected to be eligible for these. The US also has a larger pool of retail investors, but that is not normally the most reliable group for sustainable long-term investment.
Moreover, most of the UK’s most valuable companies have no problem reaching international customers — the vast majority of FTSE 100 revenue comes from overseas. Wise’s main targets are US banks, which should be sophisticated enough to handle a supplier that happens to be listed abroad.
Studies by UBS have found that listing location has little impact on valuation. Sure, the FTSE 100 trades at a price to forward earnings ratio of 12.9 compared with the S&P 500’s 22.4, according to S&P Capital IQ data. But that’s because the US index is dominated by faster-growing companies.
When UBS compared peers, British businesses were often more expensive, not less. Separate analyses by the FT have similarly found little benefit either for European companies that shift listing to the US, or for private European groups that pursue initial public offerings there. That was even before accounting for the potential impact of recent market and political volatility, which is encouraging many investors to reassess their US exposure.
Cheerleaders for the City should still be paying attention. London’s problem may be more vibes-based than data-driven, but an image problem is still a problem. Its bad reputation has been particularly hard to shake among the sort of US venture capital and growth investors that dominate funding for the most attractive tech groups — including Wise. Finding a way to woo them back — or develop a stronger homegrown venture industry — is a serious challenge.
Wise, meanwhile, has won a short-term boost: the stock rose more than 10 per cent on Thursday before falling back. There are good reasons for it to keep rising — the business is making progress towards its targets. But the company itself doesn’t need to cross any borders to get there.
nicholas.megaw@ft.com
