Last Friday, Swedish fintech Klarna filed its long-awaited IPO prospectus, confirming its desire to list on the New York Stock Exchange and kicking off the beginning of the end of its bumpy tenure as a privately-held company.
Klarna has more 90m customers across 26 markets, facilitating more than $100bn in general merchandise volume for more than 675k merchants including H&M, Walmart and Booking.com — and it’s profitable.
“The company isn’t losing money anymore, they’ve achieved a net profit and they’ve likely benefitted from the changing interest rates,” says PitchBook research director Nalin Patel. “Disregarding outside factors, it may be the best time for the company to list.”
Once priced at a lofty $45bn in 2021, Klarna’s valuation later tumbled to $6.7bn in the downturn. Media reports now suggest the Swedish fintech plans to raise more than $1bn on the public market at a valuation exceeding $15bn. But as Klarna hurtles towards its public listing, how does this valuation stack up?
What does Klarna do?
Klarna is most known for its landmark buy now, pay later product enabling shoppers to delay or split payments across interest-free installments. Klarna charges merchants a percentage fee for taking on that risk, its primary moneymaker.
According to figures from its latest IPO filing, Klarna made $2.8bn in revenue in 2024 with a pre-tax profit of $33m. In revenue terms, its biggest markets are the US and Germany, which bring in $850m and $755m respectively, with the UK and its native Sweden following suit.
Merchants fees brought in $2.1bn in 2024, equivalent to 75% of its transaction and services revenue. The remainder came from merchants advertising in the Klarna app and late fees for customers not paying on time. On top of that, Klarna also made $675m in income from its interest-incurring financial products.
Klarna’s revenue multiple (using the $15bn valuation divided by revenue) is 5.4x. That’s low in comparison to other fintechs, according to Finro Financial Consulting. The average revenue multiple across fintech is 12.5x, with public fintech companies trading at 8.8x revenue. Private fintechs are valued at 13.7x revenue, according to the same data.
Although Klarna has billion dollar revenues, its valuation is more than 450 times its pre-tax profit.
Klarna declined to comment further.
Comparison to Affirm
Klarna’s closest competitor in the buy now, pay later business is US-based Affirm. The company, founded in 2012 by PayPal cofounder Max Levchin, went public in 2021 and currently has a market capitalisation of around $14bn.
That’s a similar valuation to what Klarna is reportedly seeking, even though Affirm is lossmaking, it makes around 20% less in revenue than Klarna and has almost 70m fewer customers, according to its 2024 figures.
PitchBook’s Patel says Klarna’s perception as a European company has likely been priced into its more conservative-than-expected pricetag.
“I think the valuation is a reflection of the cooler market we have in Europe,” he says.
Making AI gains
Both Affirm and Klarna have touted the use of AI to increase internal efficiency — and a large part of the latter’s IPO prospectus hinges on its use of the technology to increase operational efficiency and cut costs.
As Sifted reported earlier this week, Klarna disclosed plans to close three of its overseas offices as part of a “strategic decision to drive operational efficiency, leverage Al and reduce administrative costs.”
The fintech plans to shutter offices in Amsterdam and the German city of Mannheim by the end of this year, and won’t renew the lease for its office in Columbus, Ohio by the end of March 2027. Its IPO filing also reveals that it reduced its staff numbers from 5,527 employees in 2022 to 3,422 employees by the end of last year.
Charles Kerrigan, fintech partner at law firm CMS, says this is likely to reassure public market investors that Klarna understands how to use emerging technologies like artificial intelligence to stay lean.
“If I was an investor, I would interpret that as saying to the market ‘we know how to work with emerging technologies and this distinguishes us from other players,’”he says.
Timing to IPO
As Klarna is looking to IPO, the market is in a tough spot. The S&P 500 has lost about $5tn in market value from its February peak, there’s an ever-changing tariff war and warnings of growing recession risks.
Klarna may not have such a easy IPO on the New York Stock Exchange, but Patel says the fintech is likely motivated by delivering an exit to its early investors.
“If a company is valued at a unicorn valuation or above, that’s a huge home run in VC even if you were valued a $45bn four years ago,” he says. “Early investors could cash out and generate a huge amount of returns here.”
Read the orginal article: https://sifted.eu/articles/klarna-ipo-valuation/
