Klarna CEO says a European tech brain drain is ‘number one risk’ for company ahead of IPO

cnbc.com:

A European technology talent brain drain is the biggest risk factor facing Klarna as the Swedish payments company gets closer to its upcoming initial public offering, according to CEO Sebastian Siemiatkowski.

In a wide-ranging interview with CNBC this week, Siemiatkowski said that unfavorable rules in Europe on employee stock options — a common form of equity compensation tech firms offer to their staff — could lead to Klarna losing talent to technology giants in the U.S. such as Google, Apple and Meta.

As Klarna — which is known for its popular buy now, pay later installment plans — prepares for its IPO, the lack of attractiveness of Europe as a place for the best and brightest to work has become a much more prominent fear, Siemiatkowski told CNBC.

«When we looked at the risks of the IPO, which is a number one risk in my opinion? Our compensation,» said Siemiatkowski, who is approaching his 20th year as CEO of the financial technology firm. He was referring to company risk factors, which are a common element of IPO prospectus filings.

Compared to a basket of its publicly-listed peers, Klarna offers only a fifth of its equity as a share of its revenue, according to a study obtained by CNBC which the company paid consulting firm Compensia to produce. However, the study also showed that Klarna's publicly-listed peers offer six times the amount of equity that it does.

Siemiatkowski said there a number of hurdles blocking Klarna and its European tech peers from offering employees in the region more favorable employee stock option plans, including costs that erode the value of shares they are granted when they join.

In the U.K. and Sweden, he explained that employee social security payments deducted from their stock rewards