Market Volatility Makes Me “Nervous” About IPOs

Texas News Today

LONDON — Klarna is likely to wait for market volatility to subside before finalizing its initial public offering plan, CEO Sebastian Simyatkowski told CNBC.

“The current market volatility is, to be honest, nervous about IPOs,” Simyatkowski told CNBC’s Carenzo at the London Tech Week meeting on Monday. “I think IPOs are better if they sound a little better, and for now, I can’t really feel them.”

The global market has recently been shaken by concerns over embattled Chinese real estate developer Evergrande, which is on the verge of collapse.

Klarna is one of the largest players in the rapidly growing current buy-later payment market. BNPL providers flourished during the coronavirus pandemic by allowing consumers to split their purchases into installments of 3-4 months. Interest is usually not charged.

According to a report by FIS-owned payment processor Worldpay, BNPL accounted for 2.1% of global e-commerce transactions in 2020, or about $97 billion. The share of the industry in the e-commerce market is expected to double to 4.2. Worldpay has said in its report by 2024.

Finally, individually valued at $46 billion, Klarna is the most valuable “pure sport” BNPL company of all time. The two closest rivals in the public market are Australia’s Afterpay (acquired by Square for $29 billion) and San Francisco-based Affirm.

Simyatkowski previously said that Klarna could choose to go public this year or in 2022. On Monday, he insisted the company was in no hurry.

“It’s more likely to happen earlier than it was a few years ago,” he said. “But there are no immediate plans.”

The main objective of Float is to give an opportunity to long-time employees and investors to monetize their shares, Klarna’s boss said. Klarna’s retail investors include Japanese conglomerate SoftBank, Chinese fintech giant Ant Group and American rapper Snoop Dogg.

Simyatkowski says he hasn’t decided where Klarna might eventually be released. He said he liked the London market because of “the amount of expertise and quality of regulatory agencies” and “the fact that the UK is a neutral place in the world”.

Klarna co-founder and CEO Sebastian Simiatkowski will speak onstage at TechCrunch Disrupt Berlin 2019 on December 11, 2019.

Noamgrai | Getty Images

But Simiatkowski said it’s unclear whether institutional investors in London have a good understanding of high-growth tech companies like him. He cited the example of a disastrous IPO for British food delivery company Deliveroo. The company’s stock fell up to 30 percent on the first day of trading in this IPO.

“I don’t think what happened with Deliveroo is completely justified,” said the Klarna founder. “I think there were some aspects that were misunderstood, and it probably would have worked better in the United States as a result.”

Klarna and other BNPL companies are being investigated more and more in the UK as the government seeks to enforce regulations in the industry. Regulation discussions will be announced by HM Treasury in October. Klarna says he welcomes the move towards regulation.

Simiatkowski said that Klarna is about 20% to 30% lower than the industry average when it comes to default rates compared to credit cards. “Overall, in anecdotal results, this product seems to work better than other alternatives on the market,” he said.

But he acknowledged that by focusing on areas other than credit in the UK market, the company “could do a better job.” For example, in some European markets, Klarna allows users to pay for goods directly from their bank accounts, rather than through card transactions.

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