If Wise, the money transfer company whose £10bn valuation makes it a big fish in London’s small pool of quoted financial technology companies, was only proposing to switch its primary listing to New York, its plan would probably sail through.
A few UK shareholders may regret the loss to the London stock market of a success story out of Shoreditch. But they usually vote in favour when management – in this case, the Wise co-founder Kristo Käärmann – says “major US growth opportunities” would be best pursued with a US listing.
However, the listing location isn’t the sole big item on the agenda at its extraordinary general meeting this coming Monday. Controversially, Wise also wants to extend the company’s “dual-class” structure, which gives enhanced voting rights to those who hold the “B” class variety. A chief beneficiary would be Käärmann: the supercharged nature of the “Bs” means his 18% economic interest in Wise becomes 55% (though capped at 50% in practice) in terms of voting clout.
This arrangement was set at listing in 2021 and was due to expire next summer under a “sunset” clause. Wise wants to extend by a full 10 years, an idea that usually upsets those investors who think good governance requires “one share, one vote” and that tech founders are not obliged to adopt Mark Zuckerberg’s levels of control freakery when it comes to other shareholders’ rights.
What’s the problem? you may ask. If shareholders don’t like the “B” class proposal, they can just vote against it while giving a thumbs up to the switch to New York. Except they can’t. Wise has structured the vote as an all-or-nothing affair. There is only one indivisible proposal on the table.
If the tactic looks like a backdoor manoeuvre, the company’s other Estonian co-founder, Taavet Hinrikus, agrees. Hinrikus left the firm soon after listing but still has 5.1% of the shares (and 11.8% of the votes) via his vehicle Skaala Investments. Two fundamentally distinct issues should not be bundled into a single vote, he argues, adding: “Wise owners deserve governance structures that enhance value, not entrench power.”
He’s right on both scores. Wise is now 15 years old and made pre-tax profits of £565m last year, so is no longer a youthful startup, one excuse tech founders offer for supercharged voting rights. In any case, Käärmann would still have almost a fifth of the shares, enough to resist most short-term agitators who may divert him from his long-term mission to have Wise handle trillions worth of cross-border transactions rather than mere billions.
The essential point is that shareholders should be allowed to decide unrelated issues – the listing and the voting rights – separately. Wise’s claim that the two are inextricably entwined reads as self-interested waffle, a bad look for a company that trumpets transparency over fees in its day job.
In an entertaining subplot, Wise has had to withdraw its claim that Pirc, one of the big proxy voting agencies, supported Monday’s proposal. The company says it only belatedly became aware that Pirc was recommending voting against. Indeed, the proxy firm’s stance is strong: “The retention of enhanced voting rights further suggests a shift toward entrenching management control.”
The proposal requires a supermajority of 75% in both classes of share by value, so the vote isn’t necessarily a slam dunk for Wise, even if that’s still the way to bet. But Wise and Käärmann deserve to lose. As noted in this column at the time, the company was being clumsily vague about voting rights and the sunset clause when it originally announced its US ambition at the start of June. Now everybody can see that a contentious governance proposal has been inserted awkwardly into the luggage for the US trip. It’s not the way to do things: make it two proposals.
