KLAR: Klarna Stock Rises 15% in IPO as Traders Show Modest Appetite for Swedish Fintech

Closing price lifted Klarna’s valuation to $17.4 billion. Not a huge weight for investors who were looking for a quick pump (and dump). Why didn’t the stock rocket higher?

🤔 Klarna IPO Fails to Impress

• Klarna stock KLAR hit the New York Stock Exchange Wednesday for its first deals as a publicly traded company. The Swedish buy-now, pay-later platform didn’t spark outsized enthusiasm from traders who showed a fairly muted reaction compared with previous hot IPOs.
• Shares of the Swedish fintech finished the day higher by a modest 15%, giving the company a $17.4 billion valuation. Klarna managed to raise $1.37 billion from the initial sale. It floated a total of 34.3 million shares, or about 9% of a total 378 million shares outstanding.
• The stock wrapped up regular trading at $45.82 a pop, above the $40 price tag initially slapped by Klarna’s underwriters a day earlier. Still, it could’ve been worse. Klarna is not exactly in an ideal shape for an IPO.

💯 Let’s Talk Some Numbers

• The company operates a risky business model and recently that’s been visible in the numbers. Skeptics say that its lending activity invites trouble – that is, customers are encouraged to borrow heavily and not pay back their loans. And that’s what’s been happening.
• Back in May, Klarna said that customers who defaulted on their loans contributed to a first-quarter net loss of $99 million. In the second quarter, the loss was $52 million from $18 million in the year-ago quarter.
• Klarna makes its money primarily by charging retailers, but it also charges penalties to those who fail to pay what they owe in time.

👀 A Look Under the Hood

• Let’s back it up a little. Klarna was regularly profitable until about five years ago when it decided to make an expensive push into the US market. In 2021, it hit a peak valuation of $46 billion and was the most valuable startup in Europe.
• Then SoftBank’s Masayoshi Son decided to invest. And if you’re familiar with his touch, you know what happened next. It doesn’t always happen, but it did happen to Klarna. One year later, the valuation had slid to $6.7 billion as rising rates made it unattractive for VCs to jam cash into startups.
• As far as revenue goes, Klarna picked up $823 million in revenue, up 21% from the year-ago quarter. Later this week, the Gemini crypto exchange founded by the Winklevoss twins will debut for trading.