Shares in Klarna, the Swedish buy now, pay later platform, closed their first day of trading 15% above their offering price following Wednesday’s (10 September) IPO.
Klarna shares debuted on the New York Stock Exchange under the ticker KLAR. The shares opened at $52 – about 30% above its IPO price of $40 – and rose as high as $57.20 during the first session. By the close of the session, though, the shares had pared back to $45.82.
“Momentum waned as the day went on,” said Russ Mould, investment director at AJ Bell. “This might simply be early investors banking some gains or day traders going in and out quickly, deciding the loss of momentum in the shares soon after the market open didn’t warrant hanging around.”
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The closing price gave Klarna a market capitalisation of $17.3 billion according to Yahoo Finance. This is lower than US-based rival Affirm (NASDAQ:AFRM), which is valued at $27.6 billion, and well below the $45.6 billion valuation it achieved during a fundraising round in 2021.
“Klarna has done its homework before the IPO,” said Niklas Kammer, equity analyst at Morningstar Equity Research. “It has recently signed multiple agreements with payment services providers, which will significantly broaden its reach as a payment method this year and in the years to come.”
The IPO netted Klarna around $222 million, while major backer Sequoia has generated an overall return of $2.65 billion from its $500 million invested in Klarna since 2010, according to CNBC.
Klarna shares opened the second day after the company's IPO 0.7% below their first session's closing price.
The background to Klarna’s New York IPO
Klarna postponed its IPO in April, thanks to the disruptive impact of Donald Trump’s tariffs on the market.
But the success of Wednesday’s IPO underscores the notion that the market is improving for prospective debutants.
“A strong after-market could convince other fintechs to take the plunge into public markets,” said Mould. “The danger is that one good deal begets a few more and then a torrent of less good ones follows behind.”
It is, however, another example of European companies eschewing their local markets in favour of a US listing.
CEO and co-founder Sebastian Siemiatkowski told an interview with Associated Press ahead of the IPO that the decision to list in the US reflected the fact that the country represents its greatest growth opportunity.
“It’s the largest consumer market in the world, and it’s the biggest credit card market in the world,” said Siemiatkowski. “It’s a tremendous opportunity, from our perspective.”
Should you buy Klarna shares?
Mould highlighted that the trajectory of Klarna’s share price following the IPO was unusual.
“It’s more common to see popular IPOs creep higher over a few weeks and then pull back as short-term traders exit and longer-term investors subsequently build positions, driving the shares back up,” he said. “Clearly, some investors don’t believe it is worth owning at the current price. Whether that’s a straight valuation call or concerns about the business model and its prospects remains to be seen.”
Other experts, though, are more optimistic. Kammer’s analysis for Morningstar states that “we think investors should take a close look at the new addition to the New York Stock Exchange and consider purchasing shares if they can”.
“Growth is what it is all about for Klarna,” said Kammer. “While its platform is currently just breaking even, starting to eke out a marginal operating profit, the company is poised for a big shift. As its platform scales and its underwriting models are enriched with more shopper behaviour data, we anticipate profitability to improve.”
Kammer expects Klarna’s operating costs to increase in the future as it reverses previous reductions in headcount. Siemiatkowski had previously suggested that thousands of staff could be effectively replaced with artificial intelligence (AI), but has since backtracked on this.
“While Klarna operates as a platform, its success hinges on investments in customer-facing staff,” said Kammer, adding that “these investments are critical to unlocking Klarna’s growth potential.”
“We project Klarna to achieve a 30% operating profit margin by 2034, with earnings per share increasing by 30% annually starting from 2025,” said Kammer.
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