Wise turns to US as some investors question dual shares

Wise Plc’s plan to shift its primary listing out of London gathered momentum after some existing shareholders rebuffed a proposal that would have allowed Chief Executive Officer Kristo Käärmann to keep his so-called golden shares for many more years, according to people familiar with the matter.In late 2024, Wise’s board began consulting with shareholders on a plan that would allow the company to preserve in London the dual-class share structure that gives Käärmann de facto voting control in the company, the people said, asking not to be identified discussing non-public information.Some shareholders — including co-founder Taavet Hinrikus, who has golden shares of his own — were against the plan to extend that structure, which is due to expire next year, the people said. That, in part, encouraged Wise to accelerate discussions around shifting its primary listing to the US, where valuations are higher and such structures are viewed more favourably, they said.The back-and-forth with investors hasn’t been previously reported. Käärmann, who still has an effective controlling interest in the company he helped found more than a decade ago, has grown Wise, which was previously known as Transferwise, into one of the largest financial technology firms on the planet with a valuation of about £10.5bn ($14.1bn)."The board considered all aspects, including shareholder feedback, carefully and decided it was in the long-term interests of Wise and its owners to move our primary listing to the US and, as soon as the board made this decision, we announced this intent to the market,” a spokesperson for Wise said in a statement. "We’re very pleased that, to date, our owners have been overwhelmingly supportive of our proposal.”Wise investors will on Monday vote on the proposal to shift its listing to the US. The fintech argues that move could ultimately open up its shares to legions of retail and institutional investors, giving it more liquidity and, presumably, boosting its valuation. The US markets offer vastly bigger trading volumes and have delivered greater returns than London in recent years, making them more attractive to prospective investors.But as part of the proposal, shareholders also have to OK a plan to extend the dual-class share structure for another 10 years. With the current structure, Käärmann has an economic interest in the company of about 18%, but controls half of the voting rights less one vote, according to a filing. Hinrikus, for his part, has a 5.1% stake and controls about 12% of the voting power.In addition to Hinrikus, who’s urged fellow shareholders to shoot down the proposal, the company has faced fresh scrutiny from shareholder advisory firms Glass Lewis & Co, Institutional Shareholder Services and PIRC in the days leading up to the vote."Glass Lewis believes multi-class share structures with unequal voting rights are typically not in the best interests of common shareholders,” the proxy firm said in a report dated July 22.Wise’s board first began discussing listing options after the UK’s Financial Conduct Authority introduced new rules last year that caused the firm’s shares to be transferred to the so-called Equity Shares (Transition) Category.Companies in this category cannot be included in FTSE Russell indexes, which attract billions of pounds from funds that directly track the benchmark.Wise would have needed its shares to be upgraded to the Equity Shares (Commercial Companies) Category in order for the company to be eligible for FTSE inclusion. For that, Wise would’ve needed both FCA approval and changes to certain parts of its articles of association as was outlined at an April investor event.Ultimately the company unveiled plans on June 5 for a New York primary listing, with Käärmann noting that the US was "the biggest market opportunity in the world for our products.” Wise’s stock surged as much as 12% that day. It surprised the City of London and prompted more soul-searching among regulators and lawmakers alike about the UK’s capital market woes.Some shareholders were taken aback when, days later, the company began circulating the formal proposal, which included a lengthy defence of the dual-class share structure and why it should be preserved for another decade. That hadn’t been mentioned directly in the original announcement.Investors weren’t the only ones who were surprised. Originally, Glass Lewis, ISS and PIRC issued reports encouraging shareholders to vote for the proposal.Within days, though, PIRC rescinded that recommendation. While Glass Lewis and ISS still continue to support the proposals, they have both updated their guidance in the last week to note their concerns about the governance changes — leaving little time for investors to absorb the new information before remote voting closed on Thursday."It is telling that, on eve of the proxy deadline, Glass Lewis have felt obliged to acknowledge the importance of the sunset issue,” Skaala Investments OÜ, an investment vehicle controlled by Hinrikus, said in a statement. "The fact that neither they, nor ISS, picked this up earlier, is an indication of how this was hidden. As a result, shareholders may already have voted, ignorant of a key governance issue which was so deeply buried in the Scheme Circular even the governance experts missed it.”For the proposal to pass on Monday, Käärmann needs a supermajority of 75% of both share classes to approve the measure, plus a majority of votes cast at the meeting or by proxy.Käärmann and his fellow board members have continued to deny the claims that they were seeking to bury the governance changes."Some people see things differently,” he wrote in a blog post. "Our plans are set out clearly and transparently.”