The “Buy Now, Pay Later” (BNPL) space has been topping recent headlines, with Swedish BNPL unicorn, Klarna confirming a whopping funding round amid a flurry of IPO rumors. With the company’s growth scaling rapidly, the timing seems right for an IPO. Despite this, close sources have alluded to the fact that Klarna may instead opt for a direct listing and is currently deliberating its alternatives.
Last year saw a massive adoption in the already popular BNPL space, and the biggest player, Klarna, has reflected this in its figures. While the sector boomed, Klarna shared that its worldwide volume and revenue for 2020 grew 46% and 40% year-on-year to more than $53 billion and $1 billion respectively. Its latest funding round was 4x oversubscribed. A list of new and existing investors generated an enormous $1 billion funding round which saw the company’s value raise to $31 billion. This comes only six months after Klarna’s most recent funding round of $650 million. Today, the company is now the highest-valued private fintech in Europe and the second highest worldwide.
With rumors placing Klarna in the next group of potential tech listings, what remains to be seen is how the company will list. Speaking on this, the company’s Chief Executive, Sebastian Siemiatkowski implied that the company is interested in a potential direct listing stating, “I think it’s a very interesting concept. I know that Spotify did it successfully.” He further added, “I can see it’s a more modern way of making a company public.” Under a direct listing, a company would not sell new shares, but would open up the trading of its existing shares that are either held or unsold. Direct listings circumvent the expensive marketing and underwriting process of traditional IPOs.
While direct listings benefit from being a cheaper way of making a company public, they do have their drawbacks, such as not raising additional capital. This isn’t really an issue for Klarna, however, which is potentially why it sees the direct listing as viable. After Spotify’s success, Slack quickly followed and embraced the uncertainty of directly listing. However, should they negate an IPO, Klarna may run the risk of not having correct marketing for its shares, and see them underperform. Tech stock has a proclivity for rising dramatically upon listing with IPOs, and Klarna’s could go the other way.
It has been shared that Klarna is not leaning strongly in either direction at this point and that the company will wait until their new CFO, Niclas Neglen settles in before they announce an informed indication of which way to go. Siemiatowski also indicated that the listing will most likely occur in 2022.
