LONDON — Klarna will likely wait for volatility in the stock market to settle before solidifying plans for an initial public offering, CEO Sebastian Siemiatkowski has told CNBC.
“The volatility in the market right now makes me nervous to IPO to be honest,” Siemiatkowski told CNBC’s Karen Tso at the London Tech Week conference on Monday. “I think it would be nice to IPO when it’s a little bit more sound. And right now it doesn’t feel really sound out there.”
Klarna is one of the largest players in the burgeoning buy now, pay later market. BNPL providers have flourished during the coronavirus pandemic by letting consumers split their purchases into three or four monthly instalments, typically without charging interest.
According to a report from Worldpay, the payment processor owned by FIS, BNPL accounted for 2.1% — or about $97 billion — of all global e-commerce transactions in 2020. The industry’s share of the e-commerce market is expected to double to 4.2% by 2024, Worldpay said in its report.
Last privately valued at $46 billion, Klarna is by far the most valuable “pure play” BNPL firm. Its two closest rivals in the public markets are Australia’s Afterpay — which is being acquired by Square for $29 billion — and San Francisco-headquartered Affirm.
Siemiatkowski has previously said Klarna may opt to list either sometime this year or in 2022. On Monday, emphasized the company was in no rush.
“It’s more likely to happen soon than it was a few years ago,” he said. “But we have no immediate plans.”
The main purpose of a float would be to give long-time employees and investors the chance to cash in their shares, Klarna’s boss said. Klarna’s private investors include Japanese conglomerate SoftBank, Chinese fintech giant Ant Group and even the American rapper Snoop Dogg.
As for where Klarna could eventually go public, Siemiatkowski says it hasn’t yet decided on a location. He said he likes the London market due to “the amount of expertise and the quality of the regulators” and “the fact that the U.K.’s a neutral place in the world.”
However, Siemiatkowski added he’s not sure institutional investors in London have a good enough understanding of high-growth tech companies like his. He gave the example of U.K. food delivery firm Deliveroo’s disastrous IPO, in which the company’s shares fell as much as 30% on the first day of trading.
“I don’t think what happened to Deliveroo is entirely fair,” Klarna’s founder said. “I think there were some aspects of that where it was misunderstood, and I think maybe it would have fared better in the U.S. as a consequence of that.”
Klarna and other BNPL firms are under increasing scrutiny in the U.K., where the government is looking to bring regulation to the industry. A consultation on the rules is expected to be released by the British Treasury in October. For its part, Klarna says it welcomes the move toward regulation.
Siemiatkowski said that, compared to credit cards, Klarna is about 20% to 30% lower than the industry average when it comes to default rates. “Overall if you look at the actual outcomes, this product works better than the other alternatives in the market,” he said.
However, he admitted the firm “could have done a better job” in focusing on areas other than credit in the U.K. market. In some European markets, for example, Klarna enables users to pay for products directly from their bank account, rather than via card transactions.