What you need to know
- Several key details are known about Klarna's potential IPO because it filed confidentially with the SEC.
- The Buy Now, Pay Later provider would be the highest-valued initial public offering of 2024.
- Here's a primer on the fintech firm started in Stockholm by men who met at Burger King.
The Klarna Group may be able to pull off the largest IPO in a single year.
The company, best known for its Buy Now, Pay Later service (BNPL), has recently begun the process of an initial public offering with the Securities and Exchange Commission. They did this via a confidential submission, which allows them to keep information hidden from the public, until they join a market.
Klarna’s press release on the IPO from Nov. 12 didn’t contain many details. The company declined comment to Investopedia questions about the valuation of the company, how many shares they plan to sell, when their IPO will be and if it would consider public listings outside the U.S. What we know so far about Klarna
This could be the largest IPO in recent memory.
Bloomberg reported that analysts recently valued Klarna at $14.6 billion. This is after Chrysalis investment, one of the company’s backers, increased its stakes in Klarna during the second quarter. Chrysalis has declined to comment about its valuation of Klarna.
That would make Klarna the second-most-highly-valued IPO of 2024, according to Dealogic, a financial markets analysis tool, a few billion dollars behind Lineage (LINE), a cold storage operator that went public this summer.
The value of Klarna has fluctuated over the past few years. Klarna revealed that its value was $6.7 billion as of July 2022. That’s a fraction from the valuation above $45 Billion a few years earlier. Klarna stated that many fintech firms were downgraded due to inflation, fear of a recession, and other economic issues.
The co-founders of Burger King met while working there. Its revenue in the first half was more than $1 Billion.
Forbes reports that CEO Sebastian Siemiatkowski co-founded the company with Victor Jacobsson, Niklas Aalberth and Siemiatkowski, whom he had met while working for Burger King. The company, originally called Kreditor was renamed in a tribute to the Swedish word “clear.”
Klarna expanded into the Nordic region first, followed by broader Europe. Then, it moved on to the U.S.A. and Australia. Klarna, according to their website, now has 575,000 merchants and processes about 2.5 million transactions per day. They also operate in 26 countries.
According to current exchange rates, the company’s revenue in the first half 2024 will be around $1.2 billion. The platform has collected interest and transaction charges on more than 47 billion dollars worth of merchandise.
Klarna has lived in the U.S.A. for 5 years.
According to the company’s website, the Swedish-based firm launched its U.S. operations in 2019 and its American headquarters is located in Columbus, Ohio.
The company announced earlier this year that it had recovered its investment in U.S. expansion after five years. America is the company’s fastest-growing market. Siemiatkowski, a CNBC reporter, said that Klarna had set a goal to be profitable in the U.S. prior to going public.
BNPLs have become a popular payment method. According to the Federal Reserve Bank of Boston, these programs have spread rapidly and now about 9% of Americans use them. Klarna’s main BNPL competitors are Affirm (AFRM), Block(SQ) and Paypal(PYPL).
The company may seek to list in other countries.
Klarna has not ruled out a public listing outside the U.S.
Siemiatkowski, a CNBC reporter last year, said that Klarna created a holding company to help pave the path for a London IPO. Klarna also seriously considered going public on the U.S. market at that time. It hadn’t excluded Stockholm or Germany, either, he added.
“In the U.S. there is a very large pool of investors with a very good understanding of fintech,” Siemiatkwoksi said. “The U.S. is our largest market by revenue, and it’s growing at a massive pace.”
Klarna gets most of its revenue from merchants.
In the first half 2024, more than 85% (of its revenues) came from service and transaction fees charged to merchants.
Klarna’s mid-year report states that the fintech company also collects interest, although its interest-free product remains more popular. About 90% of U.S. Klarna purchases are made by Americans “Pay in 4” According to the company, arrangements were made. This allows shoppers to split a purchase up into four payments at no interest, made every other week.
The company also offers traditional financing which can last for up to 2 years at interest rates as high of 34%. Recently, it has started to market products as alternatives for bank accounts and credit card.
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