Klarna's IPO
- martinatk05678
- Dec 10
- 5 min read
By Amya Hillis, Jacob Liu, Agastya Mittal, and Dirk Harrison (Columbia University); Shahmir Ahmed and Francesco Del Sesto (Bocconi University)
Photo: Jonas Leupe (Unsplash)
Summary of IPO
The buy-now-pay-later (BNPL) model and broader shift to online commerce have reshaped consumer finance over the past decade, and Klarna has been one of the central players in that transition. Founded in 2005 in Stockholm, Klarna built a platform that lets consumers split payments, pay later, and manage purchases across thousands of merchants, while offering retailers conversion-boosting checkout and marketing tools.
After peaking at a $45.6 billion private valuation in 2021, Klarna was hit by rising rates, tech multiple compression, and higher credit costs, falling to around a $6.7 billion valuation in its last major private round. Klarna spent 2023 and 2024 cutting costs and shifting its product mix toward higher-margin services, including advertising, merchant marketing, and banking products. That pivot resulted in ~24% revenue growth in 2024 to $2.81 billion and a $21 million net profit, indicating that the business could scale while moving toward sustainable profitability.
The NYSE IPO priced at $40.00 per share for 34,311,274 ordinary shares, of which 5,000,000 were new shares sold by Klarna and 29,311,274 were sold by existing shareholders.
"It is a fantastic marketing opportunity. In the U.S., there’s been a demand for an alternative to credit cards. People are tired of getting into debt, tired of the high interest rates that they charge, and they want a better product." Sebastian Siemiatkowski (CEO and Co-Founder, Klarna)
Company and IPO Profile
Sector: Financial Technology
Exchange floated: New York Stock Exchange
Amount raised: $1.37 billion
Offered price and number of shares: $40.00 and 34,311,274 million shares including 15,000,000 ordinary shares are sold by Klarna and 29,311,274 ordinary shares are sold by certain selling shareholders
Over-allotment option: 5,146,691 shares, none exercised
Valuation and relevant multiples at IPO:
- Market Capitalization: $15.1 billion
- EV: $15.1 billion
- EV/Revenue: ~5x
- EV/EBITDA: ~30x
Coordinators/Advisors
-Joint bookrunners: Goldman Sachs & Co. LLC, J.P. Morgan and Morgan Stanley
-Joint global coordinators: Goldman Sachs & Co. LLC, J.P. Morgan and Morgan Stanley
- Other bookrunners: BofA Securities, Citigroup, Deutsche Bank Securities, Societe Generale, UBS Investment Bank
- Co-managers: BNP Paribas, Keefe, Bruyette & Woods (a Stifel company), Nordea, Rothschild & Co, Wedbush Securities, Wolfe | Nomura Alliance
- Legal advisors: Latham & Watkins
- Financial Advisor/Placement Agent: Numis
- Notable investors: Sequoia Capital (22%), Commonwealth Bank of Australia, Silver Lake, GIC (Singapore Sovereign Wealth Fund)
Strategic Rationale
Klarna’s IPO reflects a pivotal transformation and strategic expansion milestone. Primarily, the listing served as a crucial liquidity event for long-suffering investors and employees following the 2022 valuation trough of $6.7 billion. This allowed key stakeholders, such as largest shareholder Sequoia Capital, to realise significant gains (7x return).
Beyond providing an exit, the IPO acts as a powerful public validation of Klarna's radically transformed business model. After its $45.6 billion peak valuation in 2021, the company executed a difficult turnaround, achieving profitability in 2024 ($21 million net income vs. a $244 million loss in 2023) on 24% revenue growth. This was largely driven by its aggressive AI adoption, which automated two-thirds of customer service inquiries, saving $40 million annually. The successful 26x oversubscribed IPO served as definitive proof to the public market that Klarna's AI-driven, efficiency-focused model was sustainable.
Klarna’s proposed IPO was projected to have enabled a meaningful capital raise of roughly $1.27 billion, unlocking fresh liquidity to scale its embedded-finance platform. This would reduce reliance on more expensive wholesale debt, reinforcing its low-cost funding model enabled by its banking license and ~$14 billion of consumer deposits.
Moreover, the IPO would support acceleration of its ecosystem expansion: capital could be deployed into its AI-driven shopping assistant, debit-card product, in-app advertising, and further expansion into deposit-based banking. Finally, by going public, Klarna would strengthen its strategic optionality, gaining currency (public shares) for potential M&A, partnerships, or tuck-in acquisitions, all while signalling credibility to merchants and consumers competing with incumbents, such as PayPal or Affirm.
Market Reaction
The initial market enthusiasm gave way to a more nuanced outlook as analyst coverage commenced following the standard post-IPO quiet period. By early October, at least 14 analysts initiated coverage, with 10 issuing buy or "outperform" ratings while others adopted neutral stances. Analyst commentary focused on several key themes.
Bullish perspectives emphasized Klarna's position as a leading global commerce facilitator. Wedbush Securities analyst Scott Devitt initiated coverage with an "outperform" rating and a $50 price target, highlighting "appealing unit economics" and early-stage opportunities in underserved markets. UBS analyst Timothy Chiodo set a $48 price target, pointing to Klarna's average gross profit take rate of 1.1–1.2% of merchandise value. Both analysts saw potential upside if execution remained on track.
More cautious voices raised questions about execution in competitive markets. Bernstein analyst Harshita Rawat adopted a neutral stance with a $45 price target, describing Klarna as a "show-me story," particularly regarding its ability to compete and expand margins in the U.S. market, which represents approximately 40% of global e-commerce and only 20% of Klarna's current gross value.
Klarna (KLAR) surged at its NYSE debut, after its initial $40 price. It offered 34.31 million shares, and intraday, the stock was traded at a volume of 48 million. It moved from an intraday high near $52 to a close of $45.82, up roughly +15% on the day. The session valued Klarna at about $19.6 billion, reflecting strong demand for BNPL exposure and Klarna’s scale in the sector. It has since faded to an all-time low of $33 over the past trading week. The 3 month decline reflects growing fears of a broader fintech valuation bubble, combined with badly timed antitrust pressure on the BNPL sector, where authorities are increasingly scrutinizing non-interest payment models and tightening oversight just as Klarna’s scale and market dominance have accelerated.
Potential Risks and Downsides
While Klarna has a strong brand visibility and clear momentum within the BNPL sector, there are significant downsides that should be considered. The most immediate vulnerability is credit risk. Klarna pays merchants upfront and collects from consumers at a later time, effectively functioning as an unsecured short-term lender. This model becomes far riskier in an environment defined by elevated interest rates amid strained household finances where small increases in delinquency rates can compress margins. Klarna operates across multiple geographies with differing regulatory standards, and maintaining uniform underwriting discipline is difficult. Any decline in repayment behavior would directly pressure earnings and likely drive sharp negative reactions in public markets.
Additionally, valuation instability exacerbates this concern. Klarna targeted a $14 billion valuation for its 2025 listing, a partial rebound from its 2022 low of $6.7 billion. However, this recovery follows an extreme drop from its $45.6 billion peak in 2021. This oscillating trend raises concern about whether Klarna’s fundamentals can sustain renewed valued optimism once exposed to public market scrutiny, especially as the firm continues to post losses, including a $109.2 million net loss in 2024 driven by international expansion costs. When considering the company’s sensitivity to regulatory shifts in BNPL markets, consumer spending cycles, and broader funding conditions, these factors could create meaningful downside pressures that could quickly undermine investor confidence.
“It’s the largest consumer market in the world, and it's the biggest credit card market in the world. It’s a tremendous opportunity, from our perspective,” Sebastian Siemiatkowski (CEO and Co-Founder, Klarna)