BREAKINGVIEWS-Klarna IPO is chance to buy now, pray later

By Karen Kwok

LONDON, Sept 3 (Reuters Breakingviews) - Klarna’s long-awaited IPO valuation must be a bittersweet moment for CEO Sebastian Siemiatkowski. The Swedish buy-now-pay-later firm on Tuesday set a pricing range that values it at up to $14 billion. That’s a far cry from its $45.6 billion peak in a 2021 private funding round, but a big improvement on the $6.7 billion low in 2022. The price tag also looks like a bargain relative to U.S. rival Affirm AFRM.O, which has a market capitalisation of $28.5 billion. But investors will still be betting that breakneck growth can continue.

Siemiatkowski has some respectable numbers to show after 19 years being in charge. Klarna, which started by offering short-term installment payments in Sweden, now earns most of its money from retailers across the U.S. and Europe. It funds a store purchase upfront, minus a fee, and then recoups the money later from customers. Growth has averaged around 20% over the past two years, and operating losses have narrowed in that time from $980 million to $121 million.

Even so, Klarna still probably deserves a discount to its larger listed peer Affirm. The U.S. company, led by PayPal co-founder Max Levchin, grew sales last year by 46%, nearly double Klarna’s rate, and analysts expect it to make nearly $190 million in net income this year, according to Visible Alpha data.

Assume Klarna can keep growing revenue by 20% a year, and sales could reach nearly $5.8 billion in 2028. If it can generate a net income margin of 12%, roughly in line with analysts’ expectation of Affirm, then Siemiatkowski’s firm could make $699 million of net income. The current $14 billion mooted valuation would therefore be equivalent to around 20 times 2028 earnings, a more than 25% discount to Affirm’s 27 times multiple in 2028, using Visible Alpha forecasts.

Siemiatkowski might think he can do better than that. After all, Klarna is expanding rapidly in the United States, and has secured an exclusive deal to handle Walmart customers. If its growth averaged 30%, then net income could reach $963 million in 2028, and the IPO’s implied multiple would be just 15 times, a big discount to Affirm.

Still, there are reasons to be cautious. Traditional lenders and credit card providers like American Express and Citigroup are muscling into the buy-now-pay-later sector, which could make even a 20% growth rate challenging. And while Klarna is now growing quickly in the United States by offering new longer-term loans of up to a year, these come with potentially higher risk: its “Fair Financing” product had allowances for credit losses equivalent to 4.7% of loans in 2025, compared with 3.4% for traditional pay-later credits. Meanwhile Klarna’s German business posted only 6% revenue growth in the first half of 2025, while sales in Sweden even shrank. The risk is that Klarna takes longer to grow revenue or boost its profit. Investors in its IPO may be buying now, and praying later.

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CONTEXT NEWS

Klarna on September 2 said it was aiming for a U.S. initial public offering valuing the fintech at up to $14 billion. Klarna and some of its investors plan to sell 34.3 million shares in the IPO at prices expected to be between $35 and $37, aiming to raise up to $1.27 billion.

Klarna’s valuation was cut to $6.7 billion in its last funding round in 2022, a steep drop from its peak valuation of $45.6 billion in 2021.