Klarna Offered 15 Million Warrants to Seal Walmart Partnership
Klarna is reportedly facing backlash ahead of its $15 billion initial public offering (IPO).
As the Financial Times (FT) reported Tuesday (April 1), some of that negativity stems from the Swedish FinTech’s recent buy now, pay later (BNPL) deal with DoorDash.
The partnership, the report said, led to a wave of social media jokes, with people comparing the idea of incurring debt to cover food deliveries to the subprime loans at the root of the 2008 financial crisis.
Klarna CEO Sebastian Siemiatkowski defended the arrangement on X: “DoorDash offers many products beyond food! . . . I know we are most famous for pay in 4. But you can use a credit card at DoorDash as well.”
This backlash, the FT report argues, spotlights the debate and skepticism around BNPL loans. Advocates view Klarna’s upcoming U.S. IPO as a milestone in BNPL’s journey to become a consumer finance staple.
Critics of BNPL, the report adds, say there are vulnerabilities to this short-term and interest-free style of lending, such as weaknesses to consumer downturns and sensitivity to increased interest rates, which in turn increase funding costs.
The report also focuses on Klarna’s recent partnership with Walmart, which already had an arrangement with rival BNPL company Affirm. To land that deal, the FT said, Klarna offered Walmart 15.3 million warrants that can be converted into Klarna stock, valued at $500 million.
Dan Dovel, an analyst at Mizuho, labeled the announcement as “a publicity stunt” aimed at driving up sentiment before Klarna goes public.
“It’s really an expensive press release,” said Dovel.
The Klarna IPO is happening at a time when the U.S. market for BNPL services is ballooning.
PYMNTS Intelligence research has shown that market totaling $175 billion. It’s a small portion of consumer spending, but still represents an 88-fold spike in BNPL over just six years.
“Growing consumer demand for fixed installment plans when they make a purchase is fueling hot competition among FinTechs and traditional banks, not just for consumer wallets but also for ties with merchants,” PYMNTS wrote last month. “The pay later ecosystem is rapidly evolving to change how Americans shop and merchants sell goods and services.”
The research — from the PYMNTS Intelligence special report “Pay Later Revolution: Redefining the Credit Economy” — finds that 51.2% of American consumers who use BNPL do so out of necessity, compared to 46.1% who use it out of convenience.
These findings, PYMNTS wrote, demonstrate that “BNPL is no longer the exclusive provenance of shoppers with crimped pocketbooks.”
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