Swedish fintech giant Klarna, known for its “buy now, pay later” (BNPL) service, has announced plans to list on the New York Stock Exchange, bypassing London for its highly anticipated initial public offering (IPO). This decision marks another significant missed opportunity for the London Stock Exchange (LSE), which has struggled recently to attract high-profile tech IPOs.
On Wednesday, Klarna confirmed it had “confidentially submitted” paperwork to the U.S. Securities and Exchange Commission (SEC) for the proposed listing. Details about the share price range or the total number of shares to be sold have not been disclosed, though Klarna is expected to secure a valuation in the multibillion-pound range.
Klarna once boasted a valuation of $46 billion following a 2021 funding round led by SoftBank. However, like many tech firms, Klarna saw a steep decline, with its valuation dropping to around $6.7 billion by 2022 as interest rates rose and consumer habits shifted. This period of financial adjustment led Klarna to reduce its workforce by roughly 10%, trimming hundreds of jobs to remain financially stable.
As the company returned to profitability and market conditions stabilized, rumors about its revived IPO ambitions emerged. Klarna’s recent choice of New York over London has raised questions about the competitiveness of European capital markets in retaining high-growth firms, particularly within the tech sector. Klarna’s move follows similar decisions by other prominent companies like British chip designer Arm, which opted to go public in the U.S. in 2023. European firms such as Flutter and TUI have also considered shifting their primary listings to hubs like New York and Frankfurt.
Kathleen Brooks, research director at brokerage XTB, stated, “The decision by Klarna to list in the U.S. further illustrates the trend of tech companies looking to the U.S. as a more attractive market.”
Founded in 2005 in Sweden, Klarna initially saw tremendous success, positioning itself as one of the world’s largest BNPL firms. Despite significant hurdles in recent years, the company has expanded heavily in the U.S., where BNPL services continue to grow in popularity, particularly among consumers managing tight budgets. Klarna’s expansion has included partnerships with a growing list of American merchants, enabling it to rival firms like Affirm, a U.S.-based BNPL competitor.
As Klarna’s footprint has grown in the U.S., the company has restructured its operations. CEO Sebastian Siemiatkowski introduced a hiring freeze for most positions outside of engineering and initiated a strategic shift to embrace artificial intelligence for tasks in customer service and marketing, which has contributed to a steady return to profitability.
While Klarna aims to attract investors with its lower fees and consumer-friendly credit alternatives, the BNPL sector has faced regulatory scrutiny. The UK government recently introduced plans to regulate BNPL services as consumer credit, and the U.S. Consumer Financial Protection Bureau (CFPB) has proposed that BNPL companies be regulated similarly to credit card providers. Regulatory updates could bring new oversight to Klarna’s operations in both the UK and U.S. markets.
The financial performance that Klarna reported in mid-2024 showed a notable recovery, with revenue growth of 27% and profits climbing to $66 million. Klarna has emphasized its continued growth, highlighting that it has gained millions of new users and onboarded 68,000 new merchant partners globally.
