Klarna's Marketing Leap: Exploring Implications for Investors in this Aggressive Move
Rewritten Article:
Klarna, the rejected university project turned billion-dollar fintech, is set for New York's public spotlight — here's why you shouldn't miss out on "KLAR" investment.
Old saying goes, 'Good things take time.' This rings true for Klarna, the fintech unicorn preparing to go public in New York City. In 2005, the trio of Sebastian Siemiatkowski, Niklas Adalberth, and Victor Jacobsson took their shot at the Stockholm School of Economics with a pitch for an online payment processing system. The judges weren't impressed, and the idea found itself in the last place. But the determined founding team didn't let that sway them; they rebranded their company from "Kreditor" to "Klarna" and embarked on a journey that would lead them to claim over 93 million active users and a network of over 675,000 merchants.
The Swedish startup has been making waves in the financial industry, boasting heavyweight partners like Apple, Adidas, Airbnb, H&M, and more. In 2024, an astounding $105 billion worth of payments were made through Klarna's platform, a substantial increase from the $6 billion in 2015.
A significant portion of Klarna's revenue comes from the popular "Buy now, pay later" feature, which allows customers to purchase items indirectly on credit from Klarna, paying it off later with interest. This year, Klarna plans to make its public debut on the New York Stock Exchange (NYSE), despite not disclosing its targeted valuation in the prospectus. Rumors suggest the company aims to raise at least $1 billion in the IPO and is gunning for a valuation north of $15 billion, a substantial increase from a $45 billion valuation in a 2021 funding round.
The proposition of multiple share classes could add complexity to the process. There will be Class A shares with one vote per share, Class B shares with ten votes per share, and Class C common shares with ten voting rights. Those holding Class A and C shares will be entitled to potential dividend payments. Notable investors like Sequoia, Silver Lake, Permira, and SoftBank have a stake in Klarna and are keen to ensure their shares are sold at the highest price possible during the IPO.
Analysts and fund managers weigh in on Klarna's IPO
The appeal of "KLAR" stock to investors remains a topic of discussion. Nalin Patel, an analyst at private equity industry service Pitchbook, points to Klarna's return to profitability in 2022 as a significant feature. However, there are concerns regarding the continued incurred losses in the operating business in 2024. These improvements in results are largely due to cuts in marketing spending and the sale of a business segment, according to Johannes Hesche, fund manager at Acatis. Other troubling signs include potential flaws in IT and the risk of incorrect financial reporting. The competition posed by rivals like PayPal, Antpay, and others cannot be ignored.
Despite these concerns, Klarna's U.S. expansion, particularly its deal with retail colossus Walmart, excites investors. Co-founder and CEO Sebastian Siemiatkowski describes the collaboration as a "major coup that left competitors jaw-dropped." Klarna's focus on artificial intelligence to reduce customer service costs, which are among the highest expenses for fintech companies, is another positive aspect.
Though Germans won't have the opportunity to participate in the IPO, trading is set to begin soon. Stay tuned for updates!
UPDATE: According to a Bloomberg insider report, Klarna is considering postponing its IPO, although no official confirmations have been released yet.
This article first appeared in the new issue of BÖRSE ONLINE. You can read it here.
In case you're interested: A finance professor shares this strategy that's helped generations of investors make successful stock and ETF choices.
- As Klarna, the fintech company once rejected by university judges, prepares for its public debut on the New York Stock Exchange, potential investors are considering the pros and cons of 'KLAR' stock.
- The 'Buy now, pay later' feature, a significant revenue stream for Klarna, makes it an interesting prospect for those venturing into business and investing.
