TransferWise valued at $5bn as New York hedge fund buys stake

·Senior City Correspondent, Yahoo Finance UK
TransferWise founder and chief executive Kristo Kaarmann. Photo: TransferWise
TransferWise founder and chief executive Kristo Kaarmann. Photo: TransferWise

Financial technology business TransferWise has been valued at $5bn (£3.9bn) in a secondary share sale, confirming its position as one of the most valuable private financial technology businesses in Europe.

TransferWise said on Wednesday that existing shareholders and some employees sold $319m-worth of shares in the business to investors looking to buy in or expand their shareholding.

D1 Capital, a New York-based hedge fund with around $12.9bn under manager, bought into TransferWise for the first time in the deal. So did Vulcan Capital, the family office that oversees the wealth of now deceased Microsoft co-founder Paul Allen.

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Existing investors Lone Pine Capital, Baillie Gifford, Fidelity Investments and LocalGlobe all bought additional shares in TransferWise as part of the deal.

The transaction is relatively unusual as TransferWise didn’t raise any new money in the deal. Founder and chief executive Kristo Kaarmann called it an “anti-fundraise” and said it was about “rebalancing” the share register.

“As the company grows, there’s a more appropriate set of investors for us,” he told Yahoo Finance UK. “Doing these transactions lets the company bring on board new types of investors.”

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Most tech businesses typically go public when they want to bring on new investors and let early backers realise some gains. Kaarmann said TransferWise wasn’t planning on going down that route any time soon.

“There’s really no demand for that,” he said. “We don’t see how being public would make us either a better company or let us achieve our mission much faster. The company doesn’t need to raise money and it can provide liquidity to shareholders, it can allow new shareholders to join.”

The share price in the transaction values TransferWise at $5bn, a 43% jump from the last public valuation of $3.5bn in May 2019. Sky News first reported the share sale earlier this month.

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The valuation maintains TransferWise’s position as one of the most valuable private European financial technology businesses, behind only Sweden’s Klarna.

“We have been impressed by the extensibility of TransferWise’s platform, which now includes individuals, businesses and financial institutions among its customers,” Teddy Gleser, a partner at D1 Capital, said in a statement.

Founded in 2010, TransferWise is a low cost international money transfer business that caters to both businesses and ordinary people. The company has eight million customers worldwide and handles £4bn in transfers each month.

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In recent years, the company has expanded into more traditional banking services with the launch of its “borderless” account and debit card. TransferWise now has £2bn of deposits in these accounts and one million debit cards in issue. It plans to launch savings and investment products in the next year.

“Valuation is reflective on the progress in adoption rather than vice versa,” Kaarmann said. “It’s not a goal in itself but as we see more businesses and more people and even now banks using TransferWise… it’s quite natural it gets reflected in how valuable our mission has been.”

TransferWise’s most recent set of accounts show the business made a profit of £10m on revenues of £179m in the 12 months to March 2019.

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Kaarmann said the COVID-19 pandemic had not thrown business off course.

“The mix has changed a little bit,” he said. “Our business customers who are in tourism probably have less volumes now, others who are in digital retail probably have higher volumes but it kind of cancels out a little bit for us.”

TransferWise has in fact hired 197 people since the lockdown began and the company is still advertising 41 jobs, Kaarmann said.