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Stockholm-Based Fintech Seeks $1 Billion as Wall Street Watches Closely
Swedish digital payments giant Klarna has taken a major step toward its long-awaited U.S. initial public offering (IPO). The company publicly filed its prospectus with the Securities and Exchange Commission (SEC), revealing a significant financial turnaround. Klarna reported a 24% increase in revenue, reaching $2.81 billion in 2024, and a net profit of $21 million—its first profitable year after heavy losses in previous periods.
The fintech firm, a pioneer in the buy now, pay later (BNPL) sector, aims to raise at least $1 billion through its IPO. Bloomberg reported that Klarna is targeting a valuation of more than $15 billion. The company has confidentially prepared for this move since November, signaling confidence in a public listing despite recent stock market volatility.
Klarna’s Financial Rebound
For years, Klarna has been one of Europe’s most closely watched startups. After reaching a $45.6 billion valuation in 2021, the company saw its worth plummet to $6.7 billion in a 2022 funding round, reflecting a broader cooling in the fintech sector. Now, its valuation has rebounded to approximately $14.6 billion, with the IPO potentially pushing it higher.
The company's financials show a stark contrast to previous years. In 2023, Klarna posted a net loss of $244 million. The shift to profitability reflects cost-cutting measures and strategic realignments, including divesting non-core businesses and strengthening partnerships with major technology firms. The firm’s AI-driven automation of customer service operations reportedly saved $40 million annually and reduced its workforce from 5,000 in 2023 to 3,500 by the end of 2024.
IPO Timing and Market Conditions
Klarna’s decision to go public comes as financial markets experience mixed signals. Rising interest rates and inflationary pressures have slowed IPO activity in recent years, but investor appetite appears to be reviving. Klarna joins other large firms, such as AI cloud computing provider CoreWeave and medical supplier Medline, in exploring public offerings.
Industry experts say Klarna’s IPO could serve as a bellwether for the fintech sector. The BNPL market is expanding rapidly, with major retailers and digital payment firms competing for a growing customer base.
Klarna’s Strategic Moves
The firm has aggressively expanded its partnerships to strengthen its market position. In recent months, Klarna announced collaborations with Apple, Google Pay, Adyen, and Worldpay to broaden its BNPL services. Additionally, Klarna is in advanced talks with a second U.S. banking partner and a second payment network, which could further diversify its credit offerings.
Klarna also moved to solidify its corporate structure ahead of the IPO. The company established a new British holding company and sold off its Checkout payments business for $520 million. In August, it acquired the assets of New Zealand’s Laybuy, reinforcing its presence in the Asia-Pacific region.
Regulatory and Operational Challenges
While Klarna’s financials are improving, its SEC filing highlighted some hurdles. The company admitted to discovering weaknesses in its financial reporting systems in 2022, an issue it is still working to resolve. Additionally, the Swedish Consumer Agency is investigating Klarna’s compliance with local marketing laws, a potential regulatory risk as it seeks public investors.
Klarna also disclosed that it has paid $2.6 million to Milkywire AB, an environmental platform founded by the wife of Klarna’s CEO, Sebastian Siemiatkowski. Though legal, such transactions will be subject to increased scrutiny under new corporate governance policies the company intends to implement post-IPO.
Investor Stakes and Market Competition
Ahead of the IPO, Klarna’s largest shareholders include Sequoia Capital, Heartland A/S, and co-founder Victor Jacobsson. Sequoia holds nearly 79 million shares, while Heartland owns 37 million.
Klarna faces stiff competition in the fintech space. Its U.S. rival, Affirm, is valued at approximately $15 billion, while Stripe and Chime hold valuations of $91.5 billion and $25 billion, respectively. Klarna’s ability to maintain profitability and scale its BNPL model in the U.S. will be crucial in distinguishing itself from competitors.
Looking Ahead
Klarna plans to trade on the New York Stock Exchange under the symbol "KLAR." The IPO is being led by Goldman Sachs, JPMorgan, and Morgan Stanley, with 11 other banks supporting the deal.
If successful, Klarna’s public debut could mark a significant moment for fintech IPOs. Investors will watch closely to see whether the company’s financial turnaround and strategic partnerships translate into long-term market confidence. A strong debut could encourage other private fintech firms, such as Stripe and Chime, to accelerate their own public listings.
