Are Wise shares a good investment following its direct listing?
Wise (LSE: WISE) shares made their debut last week on the London stock market through a direct listing rather than the traditional Initial Public Offering (IPO). The company is one of the UKs largest fintech firms and it opted out of raising new capital via an IPO. According to its website, Wise thinks that this was a fairer, cheaper and more transparent way for it to broaden its ownership. 5G is here  and shares of this sleeping giant could be a great way for you to potentially profit! According to one leading industry firm, the 5G boom could create a global industry worth US$12.3 TRILLION out of thin air And if you click here well show you something that could be key to unlocking 5Gs full potential...  Well, the stock has been listed only a week and I tend to adopt a wait-and-see approach. This is to observe how the shares start trading and are received by the market. Im going to stick with the strategy and place it on my watch list for now. An overview  Wise was founded two Estonian friends, Taavet Hinrikus and Kristo Krmann, in 2011. The firm was born out of frustration as they faced high fees when sending money between the UK and Estonia. The duo founded a company that allows customers to make cross-border money transfers at a cheaper rate and faster than the UKs leading high-street banks could. The firm was previously known as TransferWise, but it rebranded to Wise in February 2021. It has grown at a staggering rate over the past decade. It claims it now helps over 10 million people and businesses move over 5bn across borders every month, saving customers more than 1bn in fees each year. Bull case  What I really like about Wise is that it has come to market as a profitable company. Thats unlike some newly-listed firms that Ive covered, such as Deliveroo, which have been loss-making. It may seem obvious that a firm should be making profits, but the recent trend has been that unprofitable companies like to go public. And this profitability isnt a one-time-only thing. According to its lengthy prospectus, it has been making a profit since 2019. So thats three financial years of profitability so far. Its the only information in the document Ive to go by yet and the profit margins arent huge, but its a start and encouraging to see from a newly-listed public firm. I think that Wise has an easy-to-use service and has built a strong reputation in its industry. Customers like transparency and this is one of the values that the company has been built on. Plus it has expanded it products and services, which should help fuel growth in the long term. Bear case  Competition is fierce in the world of cross-border payments though. Wise has to contend with the likes of MoneyGram and Western Union, as well as PayPal. If its only going to compete on price then profitability could be hurt in the long term. As I said, profit margins are already small. So Wise needs to demonstrate that its offering value to customers if its going to survive the competition. Especially now that its a public company. I like what the company is doing and that its already profitable. But I dont think Wise shares are a good investment just yet. I think theres a lot of euphoria surrounding the stock. I normally wait for this to settle down and see what results it releases. But its definitely on my list to track closely.