Sebastian Siemiatkowski, CEO of Klarna, speaks at a fintech event in London on Monday, April 4, 2022.
Chris Ratcliffe | Bloomberg via Getty Images
A brain drain of European tech talent is the biggest risk factor facing Klarna as the Swedish payments company moves closer to its upcoming IPO, according to CEO Sebastian Siemiatkowski.
In a wide-ranging interview with CNBC this week, Siemiatkowski said that unfavorable rules in Europe over employee stock options – a common form of stock compensation that tech companies offer to their staff – could lead to Klarna losing talent to US tech giants such as Googling, Apple And Meta.
As Klarna – known for its popular buy now, pay later schemes – prepares for its IPO, Europe’s lack of attractiveness as a place for the best and brightest to work has become a much more prominent fear, told Reuters. Siemiatkowski to CNBC.
“When we looked at the risks of the IPO, what I think is risk number one? Our compensation,” said Siemiatkowski, who is approaching his 20th year as CEO of the financial technology company. He was referring to corporate risk factors, which are a common part of IPO prospectus filings.
Compared to a basket of publicly traded peers, Klarna offers just a fifth of its equity as a share of its revenue, according to a study obtained by CNBC that the company paid consultancy Compensia to produce. However, the research also showed that Klarna’s listed peers offer six times as many shares as they do.
‘Lack of predictability’
Siemiatkowski said there are a number of hurdles preventing Klarna and its European tech peers from offering employees in the region more favorable stock option plans, including fees that erode the value of the shares they get when they join.
In Britain and Sweden, he explained that workers’ social security benefits deducted from their share awards are ‘uncapped’, meaning staff at companies in these countries are more likely to lose out than people at companies in Germany and Italy, for example , where there are concrete consequences. caps in place.
The higher a company’s stock price, the more it has to pay in employee welfare benefits, making it difficult for companies to plan expenses effectively. Britain and Sweden also calculate social benefits based on the actual value of employees’ equity when sold in liquidity events such as an IPO.
“It’s not that companies don’t want to pay that,” Siemiatkowski said. “The biggest problem is the lack of predictability. When personnel costs are completely linked to my share price, and that affects my PNL [profit and loss] …it has cost implications for the company. That makes it impossible to plan.”
Over the past year, Siemiatkowski has made clearer Klarna’s ambitions to go public soon. In an interview with CNBC’s “Closing Bell,” he said a 2024 listing was “not impossible.” In August, Bloomberg reported that Klarna was close to being selected Goldman Sachs as lead underwriter for its IPO in 2025.
Siemiatkowski declined to comment on where the company will go public, saying nothing has been confirmed about the timing. Still, if Klarna goes public, it will be one of the first major fintech names to successfully debut on the stock exchange within a few years.
To confirmone of Klarna’s closest competitors in the US, went public in 2021. Afterpay, another competitor of Klarna, was acquired by Jack Dorsey’s payments company Block in 2021 for $29 billion.
Klarna brain drain a ‘risk’
A study by venture capital firm Index Ventures last year found that employees of late-stage European startups own on average about 10% of the companies they work for, compared to 20% in the US.
Out of a selection of 24 countries, Great Britain scores highly overall. However, it does a less good job when it comes to the administrative burden associated with handling these plans. Sweden, meanwhile, is doing worse and performing poorly on factors such as the scope of plans and the exercise price, according to the Index study.
When asked if he’s concerned Klarna employees might want to leave the company for an American tech company, Siemiakowski said that’s a “risk,” especially as the company is aggressively expanding in the US.
“The more prominent we become in the US market, the more people will see and recognize us – and the more their LinkedIn inbox will be pinged by offers from others,” Siemiatkowski told CNBC.
He added that there is “unfortunately a feeling in Europe that you shouldn’t pay so much to really talented people,” especially when it comes to people working in financial services.
“There is more of that sentiment than in the US, and unfortunately it hurts competitiveness,” says the Klarna co-founder. ‘When you are approached Googlingthey will arrange your visa. They will transfer you to the US. These problems that used to exist are no longer there.’
“The most talented pool today is highly mobile,” he added, noting that it is now easier for staff to work remotely from a region outside a company’s physical office space.