Wise plc.
WISE.L at 311.7 pence in London
Pink sheet WPLCF at $3.83 in the US
ADR WIZEY (even less liquid) at $3.795 in the US

This is exactly the sort of firm you wouldn’t expect me to post about.
A Europe-based fintech crashing from its highs, and I think the boss is in the news for some tax issues.
Oh, and in an industry close to that of Wirecard, the biggest financial fraud in recent European history with entertaining associated scandals.
Price crashing, but very hard to value.
Headline P/E is 10390.

But, ignoring all that sturm und drang it’s a very interesting company.
Some figures:
(in UK reporting, comprehensive income from gains/losses on investments goes on a separate line at the end after “Profit for the year”)

In millions of pounds

                       2019   2020   2021   2022    3y CAGR    YOY
Revenue               177.9  302.6  421.0  559.9      46.5%   33.0%
Gross profit          110.4  188.1  260.5  371.9      49.9%   42.8%
Operating profit       12.2   23.6   44.9   48.7      58.6%    8.5%
Profit for the year    10.3   15.0   30.9   32.9      47.3%    6.5%
Comprehensive profit   11.9   16.6   24.1   18.4      15.6%  -23.7%

Shareholders' Equity  126.4  196.8  285.3  409.2      47.9%   43.4%

So, the first perhaps surprising things to note are that this is a company that is both very fast growing, and has been profitable for five years.
It’s not just vapourware.

The other thing, since it’s the falling Knives board, is that the price is down 73.5% from its high last September, a couple of months after they went public.

If you don’t know their basic business of international money transfer, it’s very interesting.
It’s like a modern day digital “hawala” network, if you’re familiar with those.
Rather than actually moving money between countries when you ask them to, which takes time and costs money, they have a moderately capitalized subsidiary in every country.
You pay them in one country, and the subsidiary in the other country pays the payee directly right away.
So it’s a bookkeeping entry that’s moving, not your money.
I believe they later move the money themselves in big blocks from time to time to keep the subsidiaries balanced.
This process is extraordinarily cheap and efficient, so they are eating the lunch of a lot of traditional money movers by undercutting them by a mile.
You can have an account with them holding balances in multiple currencies.
They have also introduced such wonders as multi-currency credit card.
You can charge things in multiple currencies, and it creates multiple balances on the card.
You can pay off each of the multiple balances with your choice of currency.
Including paying off each one in the currency it was charged in, so there is no FX cost to you at all.

So, interesting business that is profitable and growing fast and probably worth a lot.
And the price has crashed.
Alas, I have little idea how to connect those two dots…what’s it actually worth?
Who knows if it has gone from crazy to expensive or expensive to cheap?
What metric would get you a handle on that?
They are profitable, but the profits are not yet big enough to form the basis of a valuation exercise via P/E.

I think the business is probably a good investment, at the right price.
I do not currently have a handle on what the right price might be.

I would start with this sort of approach:
Market cap is 4.44bn pounds, so they’re at about 5.8 times sales.
Operating profit margin is around 8.5%. We can estimate what fraction of that would turn into net profit on a normalized basis.
Growth rate still north of 30%/year, but we should assume that will slow.
By projecting some growth rates, revenues, operating margins, and net margins, we can estimate
what today’s price represents as a multiple of the average profits 5-10 years out.
It will be wildly off, but much better than investing just because the price is down by 3/4.
If that multiple is under 12, (and the approximations are reasonable OK), it will probably be a profitable entry.
If under 10, probably a very good move.



I happened to notice the announcement re the CEO, who is also a founder of the company, at the time. It is here–wise-/rns/fca-invest…

It is vague, inevitably, & not what you would want for any CEO let alone one running this sort of company although it does appear to relate to his personal tax situation. Also I don’t know how important he is to the company eg if he were sanctioned in some way what would be the impact.

The company (then called Transferwise) is mentioned very briefly in “The Payoff” by Gottfried Leibbrandt & Natasha de Teran - an interesting book that explained crypto to me. Ok it didn’t explain it well enough for me to explain it to anyone else (that is probably my lack) but enough that I vaguely understood it when I read it which was progress. I need another go through (at least) it to understand it better.

Re Wise - it is such a simple idea one wonders why it hadn’t been invented before - like many of the best ideas. A disrupter for sure.

Actually now I think of it no bank has an incentive to invent this as it presumably eats into their profits in this area and will do so quite significantly over time. An innovative bank (is that an oxymoron?) would be able perhaps to do something similar were they perceive it to be a threat. How long might that take is something to wonder about.



Wise plc.
WISE.L at 311.7 pence in London

Hmm, up 13% in under a week since the post, in sterling.

I gotta remember to get my buying done before I say anything : )
Not that I think my posts are influential…I’m just using “jinx” reasoning.



Jim wrote:

I think the business is probably a good investment, at the right price.
I do not currently have a handle on what the right price might be.

Not exactly a coin flip, for me anyway, as you wrote about LYLT around the same time, but I bought a little WISE (wplcf).

Not sure what the “right” price is, or would have been, but it is up maybe 50%-60% since then, so that may have been it.

Thanks, Jim