Buy Now, Pay Later Company Klarna’s Shares End First Session Above IPO Price

Shares of Klarna, a leading buy now, pay later firm, finished their first trading session Wednesday above their IPO price.

The fintech company late Tuesday announced the sale of 34.4 million shares at $40 apiece in the closely-watched initial public offering. The stock, which trades using the ticker “KLAR,” opened at $52, rising above $57 and slipping below $46 during the day before closing at $45.82.

The total sharecount pointed to a market value of about $17.5 billion as of Wednesday’s close. The company sold 5 million shares, suggesting proceeds of $200 million.

CEO Sebastian Siemiatkowski in a Wednesday interview on CNBC called an IPO a “very natural” step for the company. The company, he said, set out to challenge credit card issuers and now intends to spend the next few decades “disrupting” retail banking.

“In the future, your retail bank experience will be: a digital financial assistant wakes you in the morning, saying, ‘Hey I’ve analyzed your mortgage, and I can save you $50, and I’ll do all the paperwork. You only need to say yes,’” he said. “We want to be that digital assistant.”

Klarna helped pioneer buy now, pay later financing, in which a purchase is broken up into interest-free payments that are automatically deducted from a user’s bank account. The payment method has skyrocketed in popularity in the two decades since Klarna launched, evolving from a way to splurge to a tool many now use to pay for groceries. BNPL transactions are so ubiquitous that Fair Isaac Corp. (FICO) recently said it will incorporate them in its credit scoring frameworks. 

Klarna, which according to a regulatory filing launched in Sweden but moved its home base to London last year, held off on a planned IPO in April while markets slumped in response to a slate of new tariffs.

While waiting out the volatility, Klarna added new services and said it would sell phone plans. Klarna traditionally made money by charging merchants to evaluate the financial risk of applicants and transact with them, and through interest on some short-term loans. As BNPL growth slowed, Klarna and its counterparts began offering customers more traditional banking products and collecting revenue from e-commerce platforms.

Klarna Has Competition From Affirm, Afterpay, Others

Klarna’s estimated value has fluctuated between $6.7 billion and $45.6 billion over the past four or five years, according to news reports and company documents. 

Affirm Holdings (AFRM), a competitor with comparable revenue, has a market capitalization of about $28.8 billion, according to Visible Alpha data. Its shares are substantially above their IPO price, though they are down a bit from where they opened their first trading session in 2021. The California-based company took in $876 million in revenue last quarter on $10.4 billion in gross merchandise value.

Klarna brought in $823 million in revenue on $31.2 billion in gross merchandise value for the quarter that ended June 30th. The company said it has 111 million active customers and 98% of its transactions are interest-free in its most recent quarterly earnings report.

A much larger share of Affirm’s business—some 70% last quarter—came from interest-bearing products, according to an earnings supplement published last quarter. The average order placed by its 23 million active users amounted to $276, the document said.

Other major BNPL providers, such as Block’s (XYZ) Afterpay and PayPal (PYPL), have large payment processing and software units, making comparisons more complicated.

This article has been updated since it was first published to incorporate the comments from Siemiatkowski and to reflect closing prices.