Latest news with #KristoKaarmann
Times
2 days ago
- Business
- Times
Wise founders fight over two-tier share structure
It was a friendship that went on to spawn one of the UK's most successful companies of the past 15 years. Kristo Kaarmann and Taavet Hinrikus were both twentysomething Estonian expats working in London in 2010 and horrified by the fees charged by banks for sending money back home. Thus was born Transferwise, now Wise, an £11 billion cross-border payments business that has made billionaires of them both. However, the friendship this week soured into open hostility as Hinrikus accused Kaarmann, the chief executive, of shoddy tactics in trying to push through on the quiet an extension to a dual share structure that gives him a near stranglehold on all big decisions at the fast-growing cross-border payments group for another ten years. In a letter reproduced on Monday by Wise, Hinrikus accused Kaarmann of endangering the reputation of Wise and contravening shareholder democracy by proposing a plan that would extend the current dual share structure by a further ten years. The detail had been 'buried' in a wider document about moving Wise's primary listing from London to New York. Hinrikus was, he said, 'deeply troubled' by the plan, going on to lament the 'lack of transparency' and the 'contravention of shareholder democracy'. Shareholders had previously been 'expressly promised' when the company floated in 2021 that the dual class structure would be dismantled by July 2026. The proposal 'risks eroding investor confidence, weakening shareholder democracy, and harming Wise's long-term valuation and reputation. Entrenching disproportionate power in the hands of a few sets a dangerous precedent — one that contradicts the values on which Wise built its public credibility,' Hinrikus wrote. He urged fellow shareholders to vote against the proposal unless it is amended and said he had support from several shareholders. It was a brutal criticism from Hinrikus, who stepped back from day-to-day operations at Wise before the London listing, but was chairman until December 2021. He has since gone on to set up an angel-investing business with stakes in more than 150 disruptive start-ups and has a net wealth estimated at $1.3 billion by Forbes magazine. Wise fired back a rebuttal, denying any lack of transparency and arguing that the dual-share structure often produced superior returns, especially among US technology companies that frequently adopted it. David Wells, chairman and a former finance director of Netflix, said shareholders were sounded out and had been 'overwhelmingly in favour' of the plan. • Kaarmann, in a blog post, said many of Wise's shareholders were excited about the proposals, before adding: 'Some people see things differently. My co-founder Taavet expressed his reservations in a letter we shared today.' He said Hinrikus had been 'an important part of our journey for years' but 'no longer plays an active role at Wise'. Through a mix of A shares and vote-heavy B shares, Kaarmann owns an 18.2 per cent economic interest in the company, but 54.7 per cent of the voting power, though this is capped at 49.9 per cent. Hinrikus owns an economic stake of 5.1 per cent, and 11.8 per cent of the votes. His complaint is focused particularly on the 'bundling' of the proposals into a single vote on both the primary listing move from London to New York and a ten-year extension to the current dual shares structure. Hinrikus is proposing a change to the proposals to remove the interconnectedness so that shareholders could vote in different ways on each. It was 'entirely inappropriate and unfair' to combine the two issues in a single vote, he wrote. The planned primary listing switch, first announced in June, had already sent shock waves through the London market, which is concerned that a trickle of listing switches already announced could burgeon into a serious problem for the London market and the ecosystem of bankers, brokers, lawyers and accountants that depends on it. Sir Pascal Soriot, chief executive of Britain's second-biggest listed company, AstraZeneca, is reportedly keen to move too. • Wise value tumbles after revenue growth slows and profit dips The row raises another talking point: many traditional UK investment houses dislike dual voting structures because they can give excessive power to incumbent managements. They argue that 'one share, one vote' is the optimum system. While recent changes to the listing rules have given more power to founders, traditional shareholders are sceptical and this week created a new lobbying group, the Governance for Growth Investor Campaign, to push the case to defend shareholder interests and promote good governance. Others argue that founder-friendly share structures give entrepreneurs the breathing space to make decisions for the long run without being pressured into short-term compromises. Concerns about the governance of Wise have already been highlighted after Kaarmann was named as a deliberate tax defaulter by HM Revenue & Customs after failing to pay a tax bill in 2017-18 and fined £366,000. He explained he fell behind with his paperwork. He was then fined £350,000 last year after an investigation by the Financial Conduct Authority over his fitness to run a big financial institution, but no further action was taken. The company has been a phenomenon, slashing the cost of cross-border payments for individuals and small firms and taking business from traditional banks. It boasted 9.8 million active users in the latest quarter who together hold balances with it of £22.9 billion, up 31 per cent. It employs 2,200 people in Tallinn and 1,000 in London. It has plans to expand into the US, which was one reason given for the listing switch because it would raise the company profile in America, as well as the attraction of higher liquidity in the shares and a larger pool of potential investors to attract. Until recently, Wise had been expected to apply to join a different investment category in London so that it would qualify for inclusion in the FTSE 100. That will not now happen. The proposal requires a majority of both A and B shareholders, as well as a 75 per cent 'super-majority' in the value of shares voted. This threshold, Hinrikus said, had been lowered, a fact he noted was only disclosed 'deep within the body of the [scheme circular] document'. The arrangement would be through a court-sanctioned scheme of arrangement. Proxy voting agencies including Glass Lewis and ISS have given the proposal their blessing. The biggest outside shareholder is the Edinburgh technology investment house Baillie Gifford with an 11.4 per cent economic interest and 10.2 per cent voting interest. Others include the US tech investor Andreessen Horowitz and Jupiter Fund Management. The voting is due to take place at shareholder meetings on Monday July 28.
Yahoo
2 days ago
- Business
- Yahoo
Wise co-founder condemns ‘inappropriate and unfair' US listing proposals
The co-founder of Wise has criticised the fintech firm's 'inappropriate and unfair' governance changes within plans to move its primary stock market listing from the UK to the US. Taavet Hinrikus wrote a letter to shareholders through his investment vehicle Skaala Investments OU, which owns 5.1% of shares in Wise. The letter criticised the company's proposals to move its primary listing to a stock exchange in the US, but also to extend the voting rights of so-called Class B shareholders by another decade. A dual-class shareholding structure means the Class B shareholders have more than 90% of the voting rights. Such structures have faced criticism that they give minority stakeholders an oversized voting power over a company's proposals. Skaala Investments wrote in the letter that the proposal 'deprives owners of a fair choice and requires them to accept an unnecessary compromise, forcing an 'all-or-nothing' vote rather than allowing shareholders to approve a dual-listing but vote down a resolution granting Class B shares extended voting powers'. 'This prejudices Class A shareholders by diluting their voting power, benefiting those few with significant Class B shareholdings – primarily the CEO (chief executive), Kristo Kaarmann.' The investment group said it was 'entirely inappropriate and unfair to wrap these distinct issues together'. It urged shareholders to vote against the proposals unless the issues can be separated into two separate resolutions. Wise's board responded to the letter to say it 'takes Mr Hinrikus's views seriously' but that it disagreed with his view on the proposal. The company said its proposals would bring 'greater visibility in the US, the biggest market opportunity for our products today', while a dual-class share structure was 'essential to ensuring our continued successful performance and safeguarding our focus on executing our strategy'. The British money transfer firm unveiled plans last month to switch its primary listing from the London Stock Exchange to the US in a bid to tap into a wider pool of banking customers and investors. Wise, which was launched in 2011 under original name TransferWise, said it was not turning its back on the UK, with it planning to keep a secondary listing in London and continue hiring and investing in its UK workforce. It is set to hold a shareholder meeting later this month for investors to vote on the proposal. Sign in to access your portfolio
The Independent
2 days ago
- Business
- The Independent
Wise co-founder condemns ‘inappropriate and unfair' US listing proposals
The co-founder of Wise has criticised the fintech firm's 'inappropriate and unfair' governance changes within plans to move its primary stock market listing from the UK to the US. Taavet Hinrikus wrote a letter to shareholders through his investment vehicle Skaala Investments OU, which owns 5.1% of shares in Wise. The letter criticised the company's proposals to move its primary listing to a stock exchange in the US, but also to extend the voting rights of so-called Class B shareholders by another decade. A dual-class shareholding structure means the Class B shareholders have more than 90% of the voting rights. Such structures have faced criticism that they give minority stakeholders an oversized voting power over a company's proposals. Skaala Investments wrote in the letter that the proposal 'deprives owners of a fair choice and requires them to accept an unnecessary compromise, forcing an 'all-or-nothing' vote rather than allowing shareholders to approve a dual-listing but vote down a resolution granting Class B shares extended voting powers'. 'This prejudices Class A shareholders by diluting their voting power, benefiting those few with significant Class B shareholdings – primarily the CEO (chief executive), Kristo Kaarmann.' The investment group said it was 'entirely inappropriate and unfair to wrap these distinct issues together'. It urged shareholders to vote against the proposals unless the issues can be separated into two separate resolutions. Wise's board responded to the letter to say it 'takes Mr Hinrikus's views seriously' but that it disagreed with his view on the proposal. The company said its proposals would bring 'greater visibility in the US, the biggest market opportunity for our products today', while a dual-class share structure was 'essential to ensuring our continued successful performance and safeguarding our focus on executing our strategy'. The British money transfer firm unveiled plans last month to switch its primary listing from the London Stock Exchange to the US in a bid to tap into a wider pool of banking customers and investors. Wise, which was launched in 2011 under original name TransferWise, said it was not turning its back on the UK, with it planning to keep a secondary listing in London and continue hiring and investing in its UK workforce. It is set to hold a shareholder meeting later this month for investors to vote on the proposal.
Times
5 days ago
- Business
- Times
Wise value tumbles after revenue growth slows and profit dips
About £1 billion was wiped from the valuation of Wise, the cross-border payments operator, after it reported disappointing numbers for the three months to June. The company, which stunned the City last month by announcing plans to shift its primary listing from London to New York, reported slower than expected revenue growth and a slight dip in a key measure of profitability. The closely watched 'take rate' — the amount Wise charges in fees on cross-border transactions — slipped from 0.64 per cent in the quarter last year to 0.52 per cent. Revenues and customer volumes were also slightly below consensus expectation. However, Wise continued to win new customers, with 9.8 million using its service in the quarter, up 17 per cent on a year earlier. Wise customer holdings grew by 31 per cent to £22.9 billion. Wise said the fall in the take rate was down to 'a reduction in our average price together with a continued increase in the proportion of higher volume customers in the period.' Kristo Kaarmann, co-founder and chief executive, described the quarter as a strong start to the financial year. He also said that the listing switch proposal had been 'positively received by the owners'. Wise, which was formerly known as Transferwise, made the case for the switch because it would increase liquidity in its shares and give it access to a wider pool of potential investors. • Patrick Hosking: Wise move to Wall St is a serious blow to London's reputation There is speculation that the move will also enable Kaarmann to maintain his dominance at the company. He owns 18 per cent of the economic interest in Wise but 41 per cent of the votes and had promised to scrap that two-tier share structure by July 2026. Wise shares surged to as high as £11.60 after the listing announcement on hopes that a US listing would boost its valuation. But after falling 65p, or 5.7 per cent, they closed at £10.67, valuing the company at £10.9 billion. Analysts at Investec, who have a 'sell' rating on the shares, said the figures indicated that volume per customer was flat at £4,200.
Daily Mail
5 days ago
- Business
- Daily Mail
Wise's Wall Street ambitions hit by profit miss: Shares in the UK fintech firm tank after trading update
Wise's ambitions of a sky-high New York valuation suffered a setback yesterday as shares in the British fintech firm tanked after it missed profit forecasts. The stock fell as much as 11 per cent when it reported that earnings came in at £362million in the three months to June – an 11 per cent increase on the previous year but below analyst expectations of £372million. The London firm last month dealt the UK tech sector a major blow when it revealed plans to move its primary stock market listing from London to Wall Street in search of a higher valuation. Chief executive Kristo Kaarmann yesterday said that the proposed move had been 'positively received' by shareholders. But the trading update and share price decline raised questions about Wise's ability to attract a higher price in the US. Dan Coatsworth, an investment analyst at AJ Bell, said: 'It's a myth that switching a main stock listing from the UK to the US will automatically result in a higher valuation. 'There are plenty of examples where this hasn't happened. Wise's earnings miss is the last thing it needs ahead of a listing transition. 'It hurts the company's reputation and makes prospective investors more cautious and potentially less willing to pay a high multiple of earnings for the stock, even though it is still delivering high levels of customer and earnings growth. 'It's like asking a driver if they want to buy a sports car with a dent in it.' Shares recovered some losses and ended down 5.7 per cent or 65p, at 1067p. It is the latest setback for the fintech darling after Kaarmann was last year fined £350,000 by the City watchdog over 'significant tax issues' for his failure to pay £720,425 in capital gains tax after selling £10million worth of shares in 2017. The New York move has been described as a 'hammer blow' to the City which has suffered a mass exodus. Last month Kaarmann acknowledged efforts to reform Britain's listing rules but he said the switch was due to the US having the world's biggest capital markets which will allow more investors to buy shares. The money transfer company insisted it was not turning its back on the UK, where a fifth of staff are based, and would continue hiring and investing in the country. It will also maintain a secondary listing in London.
