Klarna boss says IPO location not a clear cut choice

·3-min read
In this photo illustration of a Klarna Bank AB logo seen displayed on a smartphone with the Klarna Bank AB logo in the background. (Photo by Thiago Prudencio / SOPA Images/Sipa USA)
Klarna is toying with the idea of listing in the US, as UK eyes BNPL regulation. Photo: Thiago Prudencio / SOPA Images/Sipa USA

Buy-now-pay-later (BNPL) giant Klarna's boss has said that the company's IPO location is not a clear cut decision, as the UK plans to overhaul both listing rules and regulations on the sector. 

Billionaire co-founder Sebastian Siemiatkowski said in an interview with the Sunday Times that at the moment his company would likely look to list in the US as the UK's financial watchdog looks to tighten the rules around BNPL lending. 

"It’s more likely that Klarna would list in the US, but are we going to consider London? Are there elements of how you guys are thinking about changing the rules around listings that could make it more attractive for us? Absolutely," said Siemiatkowski.

The recent UK listing review, spearheaded by chancellor Rishi Sunak, has proposed changes to listing rules and the prospectus regime. This was seen as a positive step in bringing the UK equity market in line with more attractive non-UK financial centres, particularly the US.

One of the key recommendations was to relax rules for special purpose acquisition companies (SPACs), so that trading is not suspended once a potential acquisition is announced.

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The revelation about Klarna's potential future follows an admission by the founder of health startup Babylon health in an interview with Yahoo Finance UK last week that the company chose to list in New York instead of London because capital markets in the US are "more innovative" and American investors are more receptive to fast-growing tech companies.

Dr Ali Parsa, Babylon's founder told Yahoo Finance UK: "In UK, there is more of an appetite for cash generative slow-growing businesses and in the US there is more of an appetite for backing the next generation of world leaders.

"There’s no surprise that basically seven out of the 10 world’s largest companies are in the US or China and they were not there 20 years ago."

Klarna is used by more than 13,500 retailers in the UK, including e-commerce heavyweight Asos (ASC.L), H&M and JD Sports. 

The latest funding round valued the company at $51bn (£36bn) so it would be a coup for whichever exchange it chooses to list on.

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Over the course of 2020, the UK's BNPL sector nearly quadrupled in size. An estimated 5 million people in ht eUK have used BNPL services since the beginning of the pandemic. 

Providers aren't required to do the same checks you might be subject to through a bank because the sector is not regulated by the Financial Conduct Authority, although clear regulation and guidelines are on the horizon. 

Voicing concerns on regulation in the UK, Siemiatkowski said he hopes to avoid a situations where it is easier to sign people up to credit cards than BNPL services. 

"I’m not that worried — I feel like I am on the right side of things. It would be worse if I was on the wrong side trying to protect something.”

Watch: What are SPACs?

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