Klarna IPO guide

Klarna IPO
Rebecca Cattlin
By :  ,  Former Senior Financial Writer

Klarna IPO: When will Klarna go public?

Klarna has announced its intention to IPO in the next year or two, although that’s about as much detail as we have. The date, price and location are yet to be ironed out, so the actual listing could still be a while off.

The firm has said it’s waiting until its new chief financial officer – former HSBC executive Niclas Neglen – has had time to settle before making any official plans. It has ruled out a SPAC, in favour of an IPO.

While Klarna could list pretty much anywhere – and is still considering a lot of different locales – it’s thought to be going public on the London Stock Exchange. Sebastian Siemiatkowski, CEO and founder of Klarna, told Bloomberg that Brexit could create an ‘amazing opportunity’ for London to solidify itself as a world fintech leader. A London listing would mean Klarna is following in the footsteps of other global fintechs such as Funding Circle, Wise and PensionBee.

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How to trade Klarna

Once it lists, you can trade Klarna in the same way as any other share. In the meantime, choose from thousands of other global stocks with City Index.

  1. Open a City Index account, or log in if you’re already a customer
  2. Search for the company you want to trade in our award-winning platform
  3. Choose your position and size, and your stop and limit levels
  4. Place the trade

Alternatively, if you’re not ready to trade live markets – but want to practise ahead of the Klarna IPO – you can set up a free demo account to trade in a risk-off environment. 

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How much is Klarna worth?

In June 2021, Klarna announced it had raised $639 million in a funding round, giving the fintech a post-money valuation of $45.6 billion. According to TechCrunch, it’s the highest-valued private fintech firm in Europe.

In February 2021, Klarna bank raised $1 billion in a new funding round. This pushed its valuation up to $31 billion, already three times the $10.65 billion valuation of September 2020, when the company raised $650 million. The February funding round was led by Silver Lake, along with investments from BlackRock and HMI Capital.

What does Klarna do?

Klarna is a fintech company that provides ‘buy now, pay later’ purchase options for customers, offering four interest-free instalments and ‘pay in 30 days’ services. It’s a mobile shopping app and platform that has flexible payment facilities for customers who don’t want to pay the full value of a good upfront and don’t want to use a credit card.

The company was launched in 2005 to make online payments easier, with its services now available on over 250,000 merchant websites – including Macy’s, Etsy, LuluLemon and H&M. Klarna has gained over 87 million users in 17 countries, of which more than 14 million are in the UK – another reason that Klarna could consider a London-listing.

How does Klarna make money?

Klarna makes money through the fees it charges to merchants listed on its platform, as well as charges to consumers who are late on payments. While short-term purchases are interest free, larger purchases with six to 36-month loans come with potential interest payments.

As the company now processes about 2 million transactions each day, it’s easy to see how these charges can stack up. Klarna expects to see its annual transaction value jump 40% to over $50 billion due to the increase in online activities amidst the global pandemic.

Is Klarna profitable?

No, Klarna is currently not profitable. While the company was profitable for its first 14 years, it has not been for the last two, losing $163 million in 2020. But according to Siemiatkowski, that’s due to increasing investments in growth and technology, and the company expects to return to profitability soon.

According to its full year 2020 report, it saw a 40% increase in total net operating income to $1,087 billion, marking the first time the company broke the $1 billion threshold.

Learn how to read a company earnings report

What is Klarna's business strategy?

Klarna’s business strategy is all about expanding its market share, investing in new geographies, expanding product offerings and gaining more traffic to Klarna.com.

Klarna has showed its intent to grow internationally, with its pay later offering launching in Australia, Belgium, Spain and Italy throughout 2020, and further locations expected throughout 2021.

Klarna has also expanded into physical stores in addition to its online presence. According to the FY2020 report, US consumers can now shop in over 60,000 physical stores that offer Klarna payment options at checkout. This is good news, given that one of the main risks facing a lot of online businesses’ is the return to brick-and-mortar businesses after Covid-19.  

Klarna is growing in popularity among young people who want an alternative to credit cards. It requires no credit history, and customers can delay their payments without hurting their credit score. All of this has meant Klarna makes purchasing easier, and in the era of online shopping and consumption, that’s pretty much driving Klarna’s bottom line.

Currently, most of Sweden’s traffic to Klarna is from existing users, rather than new signups. The company aims to address this through its new loyalty scheme – Klarna Vibe – which rewards customers who pay on time with unique offers, deals and rewards.

Merchants are the other side of this story, as most of its revenue comes from the fees it charges. The ease of customer payments boosts online sales, making the fees the platform charges businesses seem like nothing. In December 2020 alone, Klarna delivered 22 million clicks to retailers in the US.

Who are Klarna’s competitors?

Klarna isn’t the only buy now, pay later firm out there, with the likes of Sezzle, Affirm, Splitit and Afterpay competing for market share. Klarna’s $40 billion valuation is significantly above most: Sezzle has reached the $1 billion mark, Affirm sits at $18 billion, and Splitit is just $226 million. It’s most direct competition in terms of size comes from Afterpay, which has a market capitalisation of $38 billion.

However, Klarna’s largest competitors come in the online payment market, with the likes of PayPal, Stripe and Apple pay dwarfing the European newcomer. Klarna’s market share sits at just 1.17% of transactions, while PayPal takes the top spot at a whopping 66.00%. Stripe and Apple Pay sit at 11.85% and 7.18% respectively.

Obviously compared to the likes of Apple and PayPal, Klarna’s $40 billion plus valuation also looks small. Apple’s market capitalisation is now over $2 trillion, while PayPal’s sits at around $360 billion.

Who owns Klarna?

Cofounder and CEO Sebastian Siemiatkowski owns nearly 8% of Klarna; this stake is now worth $2.2 billion according to recent valuations. Victor Jacobsson, another cofounder, has a roughly 10% stake, which is worth $2.7 billion. The third cofounder, Niklas Adalberth, owns 0.4% of Klarna.

Klarna is also backed by investors such as Sequoia Capital, Silver Lake, Bestseller Group, Dragoneer, Permira, Visa, Ant Group and Atomico.

Board of directors of Klarna

The Klarna board consists of the following members:

  • Michael Moritz, Chairman
  • Sebastian Siemiatkowski, CEO and board member
  • Mikael Walther, board member
  • Andrew Young, board member
  • Lise Kaae, board member
  • Sarah Smith, board member
  • Omid Kordestani, board member
  • Roger W. Ferguson Jr., board member
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