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Klarna IPO

Everything you need to know

Swedish fintech company Klarna is rumoured to be considering an initial public offering (IPO) that could take place within the next year. Discover some essential points about Klarna’s upcoming IPO, including the company’s history, valuation, and recent financial reports.

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LSE listed
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Sometime in 2022

Going public

$45.6bn+

Valuation

40% YoY

Revenue increase

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What does the company do and how does it make money?

Klarna was founded in 2005 in Stockholm, Sweden, where it still has headquarters. It belongs to the buy now, pay later (BNPL) industry that is taking the financial world by storm, with services allowing users to spread the cost of purchases over multiple transactions, such as three consecutive monthly payments.

The company has over 90 million active consumers across 250,000 merchants in 19 countries worldwide. Popular online retailers that offer Klarna as a payment method include H&M, Adidas, Sephora, IKEA, and ASOS, and the company has expanded its product offering to include physical stores.

According to Bloomberg, the company makes most of its money by charging its partnering retailer, where some companies pay up to 3.4% of each transaction plus 28 cents for the “pay in 30 days” option. It has estimated that retailers offering a BNPL payment method see an increase of approximately 45% in average order value.

When is Klarna’s IPO date?

Klarna hasn’t yet revealed an official IPO date as the company is still in early stages. It’s expected to follow the traditional IPO route, or a direct listing, ruling out the possibility of a SPAC merger, according to Reuters. CEO Sebastian Siemiatkowski previously stated in February 2021 that the company is waiting for its new CFO, Niclas Neglen, to settle into the role before confirming any IPO plans.

The company also hasn’t chosen a definite stock exchange to list on. It has expressed interest for both London and New York, with the former being most favourable due to Brexit’s impact on improved regulations for the financial sector. Klarna could follow in the footsteps of other recent IPOs on the LSE, including Wise, Deliveroo, and Darktrace.

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What will Klarna’s share price be?

Its share price will also be revealed closer to its IPO date when the company officially files to go public.

What is Klarna’s valuation?

The company was last valued at $45.6bn in a fundraising round in June 2021 that was led by Japanese conglomerate SoftBank, raising over $639m. This makes it one of the most valuable fintech firms in the world, if not the most valuable, according to TechCrunch.

In 2013, Klarna became a unicorn company after reaching a market cap of over $1bn, also reaching 10 million users (which was more than the population of Sweden at the time).

How to trade on Klarna’s IPO

1. Register your interest

By entering your email into the sign-up box above, we will notify you when the company has listed on its chosen exchange.

2. Open an account

Choose whether you want to spread bet or trade CFDs when the derivative is available on our platform. You can practise trading on Klarna’s competitors in the meantime with virtual funds on a CMC Markets demo account.

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3. Pick a strategy

Choose whether you want to go long (buy) or go short (sell). Please note that some trading restrictions may apply on initial trading.

4. Manage your risk

Learn how to apply stop-loss and take-profit orders to reduce the risks that come with trading in the IPO market.

Read our risk-management guide

How are Klarna’s financials?

Klarna has a wealth of financial information available, despite being a private company. In 2020, the company reported revenues of $1.09bn, a 40% increase from the previous year’s figures. It was the first time that revenues crossed the billion-dollar mark. Losses also decreased across all major markets, which could be attributed to Covid-19’s positive effect on the ecommerce sector.

However, 2021 saw larger losses. In the first nine months of 2021, the company made pre-tax losses of $344m, a fourfold increase from how much it lost in the same period in 2020, according to CNBC. The majority of the losses came from general administrative expenses and credit losses. As more and more competitors enter the BNPL space, Klarna may expect to see its market share drop and new companies could see a wave of customer and investor interest.

Please note that past performance is not a reliable indicator of future results.

Why may investors be interested in Klarna’s IPO?

As well as Scandinavia, where it originated, the company’s services launched in the UK in 2014, US in 2015, and Australia and other European countries in 2020. It has particular momentum in the US, where the company showed growth of over 300% in the first half of 2021.

It boasts international investors such as Sequoia Capital, General Atlantic, Visa, Permira, Hennes & Mauritz (H&M), SoftBank, Ant Group, and TCV, who have led funding rounds in recent years.

By targeting a younger generation of customers, Klarna’s success can be part attributed to its popular mobile application, which has over 4 million monthly active US users, according to App Annie. Daily downloads in 2021 are reported to surpass the closest competitor by 20%.

Are there any risks for the company?

BNPL companies are a hot topic in 2022, and there will be major competition from tech giants such as PayPal, Amazon, and Apple, who are also getting on board with new product offerings. In August 2021, digital payments company Square announced its intentions to buy out one of Klarna’s main rivals, Afterpay, for $29bn in a blockbuster deal.

Concerns have been raised by financial regulators and credit rating companies that the company’s business model may encourage ‘reckless borrowing’, according to Bloomberg. Its target audience of Millennial and Gen Z shoppers may see themselves loaded with short-term debt if they don’t understand the process properly, which could have a negative impact on Klarna’s reputation.

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Client sentiment is provided by CMC Markets for general information only, is historical in nature and is not intended to provide any form of trading or investment advice – it must not form the basis of your trading or investment decisions.

FAQS

Is Klarna profitable?

Although it was one of the first fintech companies to reach profitability, Klarna has been unprofitable since 2019, making large losses each year. However, the company has made major investments in new technology and plans to expand to more international markets this year, signalling that the company’s financials may be moving towards a healthier state.

Are there other fintech companies having an IPO?

Other leaders within the fintech industry that are speculated to be planning a potential IPO include Monzo, Stripe, Revolut and Starling Bank. See a list of upcoming IPOs for 2022.

Disclaimer: CMC Markets is an execution-only service provider. The material (whether or not it states any opinions) is for general information purposes only, and does not take into account your personal circumstances or objectives. Nothing in this material is (or should be considered to be) financial, investment or other advice on which reliance should be placed. No opinion given in the material constitutes a recommendation by CMC Markets or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although we are not specifically prevented from dealing before providing this material, we do not seek to take advantage of the material prior to its dissemination.

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