Klarna Is Moving Toward a Big IPO. Here’s What You Need to Know

Klarna Group could pull off one of the biggest IPOs in a year.

The payments processor, known for its buy now, pay later (BNPL) service, recently started the initial public offering (IPO) process with the Securities and Exchange Commission via a confidential filing, which lets companies shield information from the public until they’re closer to joining an exchange. 

Klarna’s Nov. 12 press release discussing the IPO didn’t provide many key details. The company declined to comment in response to Investopedia’s questions about its valuation, how many shares it plans to sell, the timeline for its IPO and whether it would seek public listings outside the U.S. Here’s what we do know about Klarna.

Its IPO could be one of the biggest in some time. 

Analysts recent put Klarna’s value at about $14.6 billion after one of its backers, Chrysalis Investments, increased its stake in Klarna in the second quarter, Bloomberg reported. Chrysalis declined to comment on 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. 

Klarna’s value has fluctuated in recent years. Klarna announced it was valued at $6.7 billion in July 2022, a fraction of its valuation above $45 billion roughly a year earlier. Inflation, fears of a recession and other economic challenges led to downgrades of many fintech companies, Klarna said.

Its cofounders met working at Burger King. It did more than $1 billion in first-half revenue. 

CEO Sebastian Siemiatkowski founded the company in 2005 with Victor Jacobsson and Niklas Adalberth, who Siemiatkowski befriended while working at Burger King, according to Forbes. The business, initially called Kreditor, was renamed with a nod to the Swedish word “clear.”

Klarna expanded in the Nordic region, then broader Europe, and eventually the U.S. and Australia. Klarna now works with 575,000 merchants, handles about 2.5 million transactions a day and operates in 26 countries, according to its website.

In the first half of 2024, the company reported about $1.2 billion in revenue, according to recent exchange rates. This includes interest and transaction fees on the more than $47 billion worth of merchandise that moved through its platform.

Klarna has been in the U.S. for five years.

The company, founded in Stockholm, launched in the U.S. in 2019, and has its American headquarters in Columbus, Ohio, according to its website.

Klarna recouped its investment in the U.S. expansion within five years, the company said earlier this year. America is now its fastest-growing market, and achieving profitability in the U.S. was a milestone Klarna sought to achieve before going public, Siemiatkowski told CNBC.

BNPL has become a competitive space; these sorts of payment programs have rapidly spread, and about 9% of Americans now use them, according to the Federal Reserve Bank of Boston. Klarna’s major BNPL competitors include Affirm (AFRM), Block (SQ) and Paypal (PYPL.)

The company could seek other listings outside the U.S. 

Klarna may sell shares in the U.S. first, but it has considered public listings in other locations.

Siemiatkowski told CNBC last year that Klarna set up a holding company in the United Kingdom to pave the way for a potential London IPO. At the time, Klarna was also seriously considering going public in the U.S., and hadn’t ruled out Stockholm or Germany either, he said.

“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 makes most of its money from merchants.

The company said more than 85% of its revenue in the first half of 2024 came from transaction and service fees charged to merchants.

The fintech firm also collects interest payments, though its interest-free products remain more popular, Klarna said in its mid-year report. About 90% of U.S. purchases through Klarna are “Pay in 4” arrangements, the company said. Shoppers use that to divide a purchase into four interest-free payments made every two weeks.

The company also offers more traditional financing, which may last about two years and have interest rates of up to 34%. It has recently started marketing products as alternatives to bank accounts and credit cards.