Klarna IPO: what you need to know and how to trade shares

When is the Klarna IPO expected to take place?

Klarna chief executive Sebastian Siemiatkowski said in an early 2021 interview that an IPO ‘could happen this year, maybe it would be next year, but it’s obviously going to happen fairly soon. It’s definitely in the works but we haven’t officially started the process’.

But with more than a year having passed since that statement and still no official announcement having been made, an IPO in 2022 seems more unlikely than likely at this point.

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How to buy Klarna shares if the company lists

1. Do your research on Klarna
2. Open a CFD account
3. Search for Klarna on our platform or app and open your position

It's not yet clear where Klarna would choose to IPO, though likely candidates are the UK and the US. If Klarna lists in the UK:

• We'll offer the shares to trade right away on the day of the IPO with a CFD trading account
• CFDs cost £10 commission on UK shares

If they list in the US:

• We'll offer the stock on the same day as the listing
• To trade the shares on leverage, you'd open a CFD trading account
• CFDs cost $15 commission for US shares.

When trading, you do so using leverage. This means you may gain or lose money faster than you'd expect, as your position size is based on the leveraged amount, not your initial deposit. Trading also allows you to go short on stocks as well as long.

What does Klarna do and what is its business model?

Klarna offers buy now, pay later (BNPL) payment options for online and physical store transactions across a wide range of mass retailers like Nike, Macy’s and Sephora.

The BNPL company lets users split their payments over four equal interest-free instalments, to be paid every two weeks.

Late payments will incur a late fee of either $7 or 25% of the instalment amount (depending on which is less) at the 10-day mark. If still no payment is made, a user’s account will be paused.

Klarna also offers other payment plans, including an interest-free ‘Pay in 30’ option. Instead of paying in four batches every two weeks, users can pay any time within 30 days after their purchases have shipped. This option allows online shoppers to exchange or return items before they have paid for it.

The platform also offers traditional loan options through select retailers at a repayment rate of up to 24.99% per annum of up to two years.

Who are Klarna’s competitors?

Klarna’s biggest competitors include Afterpay, Sezzle and Zip.

Afterpay is similar to Klarna in terms of repayment terms and the merchants it works with, with 25% due immediately at the point of purchase, and the rest to be split over the next six weeks. However, Afterpay charges higher late payment fees of $10 minimum and up to 25% of the purchase price, or $68, whichever is less.

While Klarna is available across ten countries, including Australia the UK and the US, Sezzle is only available to consumers in the US and Canada. Sezzle also provides a higher credit limit of $2,500, compared to Klarna’s $1,000 limit.

What is Klarna valued at and what could the Klarna share price be?

In March 2021, Klarna raised $1 billion during a funding round that valued the company at $31 billion, becoming Europe’s most valuable private fintech firm and startup.

Three months later, Klarna’s valuation rose again to a high of $45.6 billion after securing another $639 million in a fundraising round led by SoftBank’s Vision Fund 2. That deal caused Klarna’s share price to reportedly turn 75 of its employees - who held company shares - into millionaires on paper.

Things started to take a turn when the company announced that it would be laying off 10% of its workforce in May 2022 due to the global market downturn. Klarna’s pre-tax losses also tripled to $250 million between January and March 2022, up from losses of $80 million during the same period a year prior.

By July 2022, the company announced that it raised $800 million in a new funding round that saw its valuation slashed by 85% to $6.7 billion, stating that it ‘has not been immune to the significant downdrafts of fintech stock in public markets’.

‘The company’s peers are down 80 to 90% vs peak valuations and consequently the adjustment in Klarna’s valuation is on par with its public peers from its $45.6 billion valuation in June 2021,’ it added.

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What is the outlook for the Klarna IPO?

As the company itself stated, investor sentiment towards Klarna and other fintech stocks has been waning in 2022 amidst a fluctuating stock market.

Despite the valuation plunge, Sequoia, which has been an investor since 2010, believes that ‘Klarna’s business, its position in various markets and its popularity with consumers and merchants are all stronger than at any time since Sequoia first invested in 2010’.

‘Eventually, after investors emerge from their bunkers, the stocks of Klarna and other first-rate companies will receive the attention they deserve’, Sequoia added.

For now, the company is taking this time to refocus on its core business and ‘reset’ for the long term.

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