Klarna Upcoming IPO: Buy Now, Sell Later?

Swedish fintech company Klarna, one of the giants of the fast-growing “Buy Now, Pay Later” (BNPL) industry,⁵ is gearing up for a potential IPO in the U.S. While the company has not yet filed an S-1 with the SEC, the Klarna IPO date could come as soon as the third quarter of 2024 at a valuation of around $20 billion.⁶

Klarna: company background

While BNPL often feels like a hot new category, Klarna has been in the game for nearly two decades. The company started in Stockholm in 2005 under the name Kreditor, before rebranding as Klarna in 2010. Today, the company has more than 150 million active consumers across over 500,000 merchants in 45 markets.⁷

Klarna’s CEO Sebastian Siemiatkowski is one of the company's three co-founders, along with Niklas Adalberth and Victor Jacobsson, though only Siemiatkowski remains at Klarna at this time. However, Jacobsson has recently been in the spotlight, amidst efforts to buy up private market shares as Klarna plans an IPO.

As the Financial Times reported, Jacobsson has been using special purpose vehicles to acquire Klarna shares, using his right of first refusal (ROFR) to step in as a buyer.⁸

BNPL growth amidst high interest rates

Klarna’s core business is currently in the BNPL market, with around 70% of its fiscal year 2023 revenue coming from retail partner fees,⁹ as merchants share revenue with Klarna due to the potential for the BNPL financing method to attract customers.

For the year, Klarna grew revenue by 22% to reach approximately $2.2 billion, and gross profit increased by 60%, which helped bring its adjusted operating result up by 95%. The company still had a slight loss for the fiscal year but is getting closer to net profitability.¹⁰

These improvements have come amidst high interest rates, which can provide both headwinds and tailwinds. Many BNPL options, including Klarna’s core offering, do not charge interest if payments are made on time, so that could be appealing to some consumers compared to high credit card rates, for instance.¹¹

However, high interest rates and inflation can also threaten areas like consumer spending and potential credit losses if users do not pay back BNPL financing.¹² Higher borrowing costs also affect the ability of companies to invest in innovation.¹³

These issues help explain why Klarna and other fintech companies struggled with valuations in recent years, such as with the Financial Times reporting in 2022 that “with inflationary pressures increasing, investors have soured on growth-chasing fintechs, which have suffered an even steeper decline than any other technology sector.”¹⁴

However, consumer spending has remained resilient according to Axios,¹⁵ and Klarna has been able to achieve a 42% improvement in consumer credit losses for fiscal year 2023.¹⁶

In terms of future potential, a possible Klarna IPO could tap into the buzz around generative AI. The company has been using AI to improve profitability, such as through integrations with ChatGPT to handle customer queries.¹⁷

New revenue opportunities include offerings such as Klarna Plus, a subscription service that helps users avoid service fees at retailers where Klarna is not accepted.¹⁸ Klarna has also expanded its business into other areas of fintech recently, such as by opening a waitlist for customers in the U.S. for a Klarna credit card, issued by WebBank.¹⁹

Klarna stock price history

Klarna’s Forge Price is $385.88. ²⁰ Forge Price is a derived data point that reflects the up-to-date price performance of venture-backed, late-stage companies, and is calculated based on a proprietary model incorporating pricing inputs from primary funding round information, secondary market transactions, and indications of interest (IOIs) on Forge. As shown in the above chart, Klarna has significantly outperformed both the FinTech sector of the Forge Private Market Index, to which it belongs, and the broader Forge Private Market Index thus far in 2024 and over the last 12 months. ²¹

Klarna funding history and private market valuation

Klarna has raised a total of $4.5 billion over 32 funding rounds, according to Forge Data.²² The company has a long history of private market funding, such as with the Klarna Series A announced back in 2007.²³

The expected $20 billion valuation for the Klarna IPO is a substantial increase from Klarna’s last-known valuation of $6.7 billion.²⁴ Yet it’s still far below the fintech company’s peak, when it hit a $45.6 billion post-money valuation in 2021.²⁵

Some of Klarna’s top investors include Sequoia Capital, Silver Lake, Mubadala Investment Company, and the Canada Pension Plan Investment Board, to name a few. Klarna has also raised money from retailers such as H&M and Macy’s. ²⁶

Looking ahead

More details about the Klarna IPO will likely be available in the coming months, particularly if the company moves forward with its plans by filing with the SEC.

Check back here or take a look at Forge’s upcoming IPO calendar to stay in the loop about the Klarna IPO and other pending public offerings.

If you’re interested in investing in private companies like Klarna, read more about pre-IPO investing or register on Forge Markets today to get started.