Klarna Makes Strong Wall Street Debut, Valued at Over $16 Billion

Klarna, the Swedish fintech company known for its "buy now, pay later" (BNPL) services, made its U.S. stock market debut on Wednesday, following a delay earlier this year. The initial public offering (IPO) was met with strong investor interest, with the company’s valuation reaching over $16 billion by Friday’s market close. This marked a significant milestone for the firm, which is seeking to expand its services beyond its core BNPL business.

The IPO, which was reportedly oversubscribed, raised $1.37 billion for Klarna and its early investors. Shares were priced at $40 each, but surged to $52 on their first day of trading, representing an initial pop of more than 30%. The firm’s valuation reached more than $19 billion at one point, although shares settled at around $46 by the end of Wednesday, valuing the company at $17 billion. Despite the successful debut, Klarna’s current valuation is a notable decrease from a peak of more than $45 billion in 2021, when a private investment valued the firm during a period of economic slowdown and rising interest rates.

Klarna, founded two decades ago, has positioned itself as an alternative to traditional credit cards. It is a major player in the global shopping space, with over 26 million users in the United States alone. While the company makes the majority of its revenue from fees charged to merchants, it is actively working to diversify its offerings. CEO Sebastian Siemiatkowski noted that more than 20% of the company’s transactions are debit-based, where users pay the full amount upfront. Klarna plans to launch a new card and has expressed interest in mobile phone plans to expand its presence.

The rapid growth of the BNPL sector has drawn scrutiny from regulators and financial experts who express concerns that the model could encourage consumers to spend beyond their means. A recent LendingTree survey found that more than 40% of BNPL customers reported a late payment in the past year, an increase from the previous year. However, Siemiatkowski countered these concerns by stating that the firm’s credit losses are considerably lower than those for traditional credit cards.

Despite these risks, the BNPL model remains popular with consumers. As one user, Randis Dennies of Memphis, Tennessee, noted, the service provides "easy access" to purchases, especially during a period of economic uncertainty marked by inflation and a challenging job market.