Klarna IPO: what you need to know and how to trade shares

When could the Klarna IPO take place?

Klarna has filed initial public offering (IPO) documents in the US, including a ‘confidentially submitted’ draft registration statement to the US Securities and Exchange Commission (SEC). The IPO will likely value Klarna somewhere in the region of $15 billion and $20 billion, with the company planning to list once the SEC review has finished, subject to market conditions.

This IPO is special because it’s arguably the first real test of sentiment for a large market launch since the Reddit IPO, in a world where the rates are starting to fall, and the US is about to embark on President Donald Trump’s second term.

It also represents another blow to the European markets given Klarna’s Swedish heritage, following on from fellow Swedish native Spotify's New York listing in 2018.

How to buy Klarna shares if the company lists

1. Do your research on Klarna
2. Open a CFD account
3. Search for Klarna on our platform or app and open your position

It's not yet clear where Klarna would choose to IPO, though likely candidates are the UK and the US. If Klarna lists in the UK:

• We'll offer the shares to trade right away on the day of the IPO with a CFD trading account
• CFDs cost £10 commission on UK shares

If they list in the US:

• We'll offer the stock on the same day as the listing
• To trade the shares on leverage, you'd open a CFD trading account
• CFDs cost $15 commission for US shares.

When trading, you do so using leverage. This means you may gain or lose money faster than you'd expect, as your position size is based on the leveraged amount, not your initial deposit. Trading also allows you to go short on stocks as well as long.

What will Klarna be valued at and what will the share price be?

In March 2021, Klarna raised $1 billion during a funding round that valued the company at $31 billion, at the time making it Europe’s most valuable private fintech firm and startup.

Three months later, Klarna’s valuation rose again to a high of $45.6 billion after securing another $639 million in a fundraising round led by SoftBank’s Vision Fund 2. That deal caused Klarna’s share price to reportedly turn 75 of its shareholding employees into paper millionaires.

Things started to turn south when the company announced that it would be laying off 10% of its workforce in May 2022 due to the global market downturn. Klarna’s pre-tax losses also tripled to $250 million between January and March 2022, up from losses of $80 million during the same period in the year before.

And in its latest official fundraising round, also in 2022, it was valued at just $6.7 billion. However, the finances have improved since, with H1 2024 results seeing US gross profits climbing by 93% year-over-year leading to global adjusted operating income of SEK 673 million (US$62 million).

The company has also suffered from an internal power struggle whereby third-largest shareholder Victor Jacobsson has been ousted from the board after disagreements with CEO Sebastian Siemiatkowski. Most consider that this argument was centred around Jacobsson’s use of special purpose vehicles to buy shares in the company on the secondary market and using them to oppose the leadership.

By early 2024, Bloomberg reported that Klarna was eyeing a $20 billion IPO, though it may now be slightly lower than this. The share price will be derived from the market capitalisation of the company and the number of shares being issued. However, you might expect the company to set a share price in line with big tech rivals to encourage buyers.

What is Klarna’s business model?

Klarna offers buy now, pay later (BNPL) payment options for online and physical shop transactions across a wide range of mass retailers like Nike, Macy's and Sephora.

The BNPL company lets users split their payments over four equal interest-free instalments, to be paid every two weeks. Late payments will incur a late fee of either $7 or 25% of the instalment amount (depending on which is less) at the 10-day mark. If still no payment is made, a user’s account will be paused.

Klarna also offers other payment plans, including an interest-free ‘Pay in 30’ option. Instead of paying in four batches every two weeks, users can pay any time within 30 days after their purchases have shipped. This option allows online shoppers to exchange or return items before they have paid for it.

The platform also sports traditional loan options through select retailers at a repayment rate of up to 24.99% per annum of up to two years. Klarna’s biggest competitors include Affirm, Afterpay, Sezzle and Zip — it's a very competitive marketplace.

Klarna has been focused on expanding in the US over the past few years, which has hurt profitability and also been fairly expensive. For context, it recently made a deal with hedge fund Elliott to offload £30 billion of its UK loans to bolster the balance sheet. Siemiatkowski has also pledged to almost halve Klarna’s workforce by replacing personnel with artificial intelligence in the customer service and marketing departments — and there is currently a hiring freeze, excluding engineers.

Despite the volatile valuation, which will really only be truly discovered in the public markets, major investor Sequoia believes that ‘Klarna’s business, its position in various markets and its popularity with consumers and merchants are all stronger than at any time since Sequoia first invested in 2010.’

Why are there Klarna ethical concerns?

Buy now, pay later firms have a mixed reputation — some consider Klarna to be a valuable service option to help spread out payments with a lower rate of interest than most credit cards — but others have accused the company of misleading messaging, driving them into unaffordable debt. Critics also argue that BNPL schemes like Klarna encourage overspending by manipulating customer psychology, often ruining personal credit scores in the process.

Sweden’s Financial Supervisory Authority has previously criticised Klarna's risk assessments, saying the company has not done enough to battle money laundering and terrorist financing. The UK recently announced plans to regulate the sector as consumer credit, while the US Consumer Financial Protection Bureau is planning to regulate all BNPL schemes like credit cards.

Arguably, many of the same criticisms levelled at Klarna can equally be applied to its rivals

Klarna-related investments

While you wait for the Klarna IPO, there are several alternatives to consider. In the US, Affirm is a key competitor, as is Afterpay — which was acquired by Block in 2021. Sezzle and Zip are also popular choices, on the ASX.

For those seeking some diversity, the PureFunds ISE Mobile Payments ETF may be an interesting choice. It seeks to track the mobile and electronic payments industry, focusing on credit card networks, payment infrastructure and software services, payment processing services and payment solutions.

Klarna IPO summed up

• Klarna has filed initial public offering (IPO) documents in the US, including a ‘confidentially submitted’ draft registration statement to the US Securities and Exchange Commission.
• The IPO will likely value Klarna somewhere in the region of $15 billion and $20 billion
• This IPO is special because it’s arguably the first real test of sentiment for a large market launch since the Reddit IPO
• Klarna offers buy now, pay later (BNPL) payment options for online and physical store transactions across a wide range of mass retailers

What is the outlook for the Klarna IPO?

As the company itself stated, investor sentiment towards Klarna and other fintech stocks has been waning in 2022 amidst a fluctuating stock market.

Despite the valuation plunge, Sequoia, which has been an investor since 2010, believes that ‘Klarna’s business, its position in various markets and its popularity with consumers and merchants are all stronger than at any time since Sequoia first invested in 2010’.

‘Eventually, after investors emerge from their bunkers, the stocks of Klarna and other first-rate companies will receive the attention they deserve’, Sequoia added.

For now, the company is taking this time to refocus on its core business and ‘reset’ for the long term.

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