Payments firm Transferwise has notched up a $5bn valuation following a share sale, making it one of the most valuable tech start-ups in Europe.
The London-based fintech said on Wednesday it had completed a $319m secondary share sale led by new investor D1 Capital Partners and existing shareholder Lone Pine Capital.
It added that existing shareholders Baillie Gifford, Fidelity International and LocalGlobe increased their holdings in the business. As part of the deal, shares were sold by employees and some existing shareholders.
The deal catapults the privately-held business from a £3.5bn valuation it was given after another share sale last May.
Profitable fintech
The business, launched nine years ago, has eight million customers globally and processes $5.2bn in cross-border payments a month.
The company is part of a new wave of firms transforming the global payments industry as new technology drives down costs and improves speed and efficiency for customers. The firm says almost a third of its international transactions are delivered in less than 20 seconds.
These new firms compete against incumbents such as Western Union and MoneyGram.
The Transferwise share sale makes it one of Europe’s most valuable fintech start-ups, with the top three — Revolut, Klarna and Checkout.com — each worth $5.5bn.
However, unlike many of its rival fintech unicorns — such as Revolut, Monzo and N26 — TransferWise is profitable. A unicorn is a private firm valued at over $1bn.
TransferWise posted a net profit of $7.9m for the year to March 2018, with revenues almost doubling to $148m compared to the previous year.
The business said: “During the Covid-19 pandemic TransferWise has seen an uplift in new customers seeking digital alternatives, with overall transfer volumes continuing to grow.”
The fintech said it is currently adding 10,000 business customers a month.
Founders stakes worth $1bn
Management consultancy Bain & Company expects the adoption of digital payments to climb as much as ten percentage points to 67% of total transaction values globally by 2025.
Transferwise was founded by two Estonian entrepreneurs Taavet Hinrikus, chairman and Kristo Kaarmann (pictured), chief executive, in 2011 and now employs over 2,200 staff in 14 offices around the world.
Kaarmann said: “We’ve been funded exclusively by our customers for the last few years and we didn’t need to raise external funding for the company. This secondary round provides an opportunity for new investors to come in, alongside rewarding the investors and employees who’ve helped us succeed so far.”
Last month, the firm secured a licence from the Financial Conduct Authority to offer investment products, a move that it says will allow customers’ cash balances to earn a more attractive return. The business holds over £2bn in deposits in its borderless customer accounts.
Hinrikus and Kaarmann are thought to own around 40% of TransferWise between them, which means this deal boosts their holdings to $1bn each. It is unclear whether either of the two men sold stock in this sale.
Other investors in the firm include British billionaire Richard Branson and PayPal co-founders Peter Thiel and Max Levchin.
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