London closes the funding loop by having a big Fintech IPO with Worldpay

By Bernard Lunn

Worldpay had a successful IPO last week on the London Stock Exchange, valuing the business around $7 billion. This places Worldpay about #8 in the Daily Fintech Index (ahead of Lending Club).

A few months ago we wrote that London needs a big IPO success to earn the right to be seen as the Fintech Capital of the World.

Recently it has mostly been bad news on the UK listed Fintech front with Monitise and Tungsten Network. London needed a big success. Worldpay is that big success.

There is no short cut to IPO success. The numbers bar for public investors is very high. Attempts to short cut the process with clever listing gimmicks (reverse mergers, junior markets etc) usually only get you to small cap hell (most investors ignore you). Today the mantra is “grow privately until you are ready, there is plenty of private equity to support that”.

This is being billed as “the largest London listing this year.” This will be big payday for Worldpay’s US private equity owners (Advent International and Bain Capital). They are reported to have earned a combined profit of £3.2bn.

Clearly Worldpay could have gone public on NYSE or Nasdaq. The fact that they chose London is significant.

Worldpay is not the only interesting Fintech story in the UK public markets. Reuters reports that Funding Circle “planned to raise 150 million pounds through the launch of a new London-listed fund that will provide loans to small businesses.

This is NOT Funding Circle going public. The story is more interesting. This is a publicly listed debt fund that is “targeting a dividend yield of 6-7 percent a year. ”

If Funding Circle can deliver that dividend, a lot of cash flow hungry investors – starved by prolonged ZIRP – will find that a pretty attractive yield. Lets see if they can do that.

A year ago I wrote that a big IPO win was one of two things on the UK Fintech to do list. Tick check on one of those items. Or at least a good start.

In that post I wrote that the UK unicorn “still jumps on Virgin Atlantic to go to NY for the IPO. The reason proudly European entrepreneurs go to NY for the IPO is the same reason that Willy Sutton robbed banks – it is where the money is. You need that money and you need the branding event in America.”

If a London IPO means you only get UK investors, it is doomed to be a minor local exchange. There is no reason why US or Asian investors will not buy stocks on LSE. Hedge Funds, Sovereign Wealth Funds and Family Offices (the three big, fast moving pools of capital) are quite comfortable investing globally.

Investors don’t care which exchange they buy and sell on, as long as it is reputable and competitive (LSE clearly scores on both points) and the data is easily accessible. Making the data more accessible is the reason why I keep banging the XBRL drum).

It is a big deal that Worldpay did its IPO before First Data – both are in payments and both were backed by US Private Equity. With a market cap of $20 billion, First Data is bigger than Worldpay (about #6 in the Daily Fintech Public Index), but we can now do valuation comparables across US and UK exchanges and I expect US and Asian investors interested in the payments space to be checking out Worldpay in London. Square IPO may struggle with these comparables.

Daily Fintech Advisers (the commercial arm of this open source research site) can help implement strategies related to the topics written about here. Contact us to start a conversation.


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