The IPO market has been buzzing with activity this year, especially with companies in the financial domain. While stock and crypto exchange eToro (TORO) had a spectacular debut, stablecoin issuer Circle (CRCL) also saw strong demand for its shares when it came out with its own IPO. Now, adding to this checkered list will be Klarna.
Founded in 2005 and rebranded in 2010, Klarna is a Swedish fintech company that specializes in “buy now, pay later” (BNPL) services and broader digital financial tools. Klarna offers flexible installment payment options for shoppers in both online and in-store environments. It partners with processors like Worldpay, Adyen, Apple (AAPL) Pay, Google (GOOG) (GOOGL) Pay, and Stripe to embed Klarna’s services widely across merchants and platforms.
Seeking to raise about $1.7 billion by offloading roughly 34.4 million shares, the company’s valuation is expected to soar to approximately $14 billion at the higher end of the expected price range. The price range is between $35 and $37. The company intends to use the net proceeds from this offering for general corporate purposes, including working capital, operating expenses, and capital expenditures.
Not just in BNPL, Klarna has ambitions to take on the traditional banks. Aiming at them, the CEO, Sebastian Siemiatkowski, said that banks have garnered undeserving profits for decades by operating “under the shield of misguided regulation, stifled competition and insurmountable barriers to entry.”
However, the reality is that Klarna had not reported an annual profit between 2018 (when it first launched its Klarna app) and just last year. It has been criticized for promoting a culture of debt by skeptics.
So, where does that leave the IPO? Should an investor subscribe to it? Let’s try and analyze that.
Although Klarna has yet to be consistently profitable, its revenues have grown at a CAGR of almost 14% in the past three years. The company reported revenues of $2.8 billion in 2024, which were $1.9 billion in 2022 and $2.3 billion in 2023. Losses turned…
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