Earlier this week, reports emerged that Swedish fintech Klarna was once again preparing to list on the New York Stock Exchange.
Founded in 2005, Klarna made its name with its buy-now-pay-later (BNPL) product, which enables shoppers to delay or split payments. With millions of customers, billions in gross merchandise volume and a strong customer base both in the US and Europe, it’s long been viewed as a potential IPO candidate.
The fintech was originally set to go public in March this year, before market turbulence triggered by President Donald Trump’s tariff regime derailed its IPO ambitions. Once priced at $45bn, Klarna is now said to be targeting a valuation between $13-14bn at a time when public markets appear to be warming up again.
However, some industry watchers say the hype surrounding the “perennial IPO candidate” has faded, as public market investors increasingly favour companies operating in buzzier sectors like AI and crypto. Recent quarterly results, which showed an uptick in losses and provisions for potential credit losses, could also deter a favourable listing.
“Klarna has been a possible IPO candidate for several years now, so there are going to be questions about why it hasn’t listed before,” says Samuel Kerr, global head of equity capital markets at Mergermarket and Dealogic. “It has been a perennial IPO candidate.”
Klarna’s latest results
When Klarna filed its IPO prospectus in March, the fintech reported $2.8bn in revenue for 2024, with a pre-tax profit of $33m. Alongside the results, the company trumpeted partnerships with OnePay, a consumer fintech integrated into US retail giant Walmart and a much-memed partnership with food delivery service DoorDash.
In less turbulent times, those tie-ups and results would have likely put the fintech in good standing to realise its IPO ambitions. But Klarna’s latest results raised some concerns.
For the first quarter of this year, Klarna reported $92m in pre-tax losses, compared to a loss of $42m for the same period in 2024. Its second-quarter results continued that trend, more than doubling year-on-year from $19m to $46m.
“There might be some investors who do look at a lack of profitability as an issue,” says Kerr. “It’s not like in 2021 when you could come to the market with variable profitability on your books.”
Q1 results also showed a 17% increase in consumer credit losses and in its Q2 results, Klarna’s topline was also impacted by the growing money the company’s been putting aside in case of potential credit losses.
“To me, setting aside more today shows discipline,” says Finimize analyst Theodora Joseph. ”Markets usually prefer conservative provisioning because it reduces the risk of nasty surprises later.”
Risky business
Klarna’s credit losses in the second quarter of the period remained low, at just over half a percentage point of gross merchandise volume.
For some investors, however, this underlines how Klarna’s business depends on less reliable borrowers.
“If you’re reliant on discretionary consumer purchasing and lending people money to buy these discretionary goods over a time period, that’s quite a risky business,” says Kerr.
Klarna has sought to change that perception, however, by diversifying its revenue streams. In the months since its public listing fell through, Klarna has made efforts to expand beyond BNPL, pushing into banking services such as debit cards and cashback.
Klarna has held a banking licence in its native Sweden since 2017, and last month, the fintech was awarded an electronic money licence, which will allow the fintech to offer debit cards and savings accounts to its 11m UK customers. Stock trading and remittance payments are set to be launched next, according to a Bloomberg interview with CEO Sebastian Siemiatkowski earlier this month.
The fintech still makes most of its money from charging merchants a percentage fee for its BNPL product. In its latest quarterly results, Klarna didn’t provide a breakdown of how much of its transaction and service revenue came from merchant fees.
But in its 2024 prospectus, it was its primary breadwinner, bringing in 75% of the $2.1bn in revenue it brought in from transaction and service revenue. On top of that, Klarna also made $675m in income from its interest-incurring financial products.
Klarna’s push into banking is likely to assuage investor concerns that its business model is overly reliant on lending to a financially distressed population at a time when costs are rising.
“If I were sceptical about the possibility of large losses later with the BNPL model, the neobank would certainly help future-proof the business,” Kerr says. “To have banking services alongside lending services feels like a more complete story to me.”
A fintech summer?
It also aligns Klarna with public market peers that have either pulled off successful IPOs or neobanks that have gathered steam on the capital market as of late. Brazilian neobank Nubank, for instance, has seen its stock price increase by over 40% in the past year to date. And when US neobank Chime went public in June, opening day saw its share price jump by over 50%.
A spate of successful fintech listings in the US, including Chime and crypto companies like stablecoin payments business Circle and digital assets exchange Bullish, have been a cause for optimism.
Finimize’s Joseph says these successes bode well for Klarna’s IPO. She cites how the stock of Klarna’s US rival, Affirm, is now trading hands at a share price that’s more than doubled since April.
“All that makes this a much friendlier market than the one Klarna faced earlier this year,” she says.
But that doesn’t mean it’s going to be a clear-cut listing for Klarna. Mergermarket’s Kerr says the stock market’s current buzz is largely focused on the specific sectors of AI and crypto. He cites the dissipating hype over Chime, which stock price has now returned to its IPO offer price. In comparison, Bullish and Circle along with AI-led design tool Figma — all of which listed this summer — are all currently surging well above their pricetag at listing.
“I certainly wouldn’t read into what’s happening in the IPO environment as across the board for all listings,” he says. “There are very particular situations where investors want to invest in these ‘new economy’ ideas, like AI and cryptocurrency.”
Read the orginal article: https://sifted.eu/articles/is-klarna-ready-to-ipo/
