On Friday (Feb. 7), markets swooned by roughly 1%, as measured by the S&P 500.
Tariffs and inflation have dominated the headlines, along with a set of volatile situations on Capitol Hill, as entire agencies’ operations are paused, staffing situations are uncertain and hiring is slowing.
And yet, to quote the old song, the fundamental things apply, at least as time goes by. With the whipsaw action of stocks overall, it might seem a perilous time to go public. On Friday, the Financial Times reported that Swedish buy now, pay later (BNPL) giant Klarna is readying for its IPO on the U.S. markets.
The report cited people familiar with the matter, with an eye on an April listing, for a valuation that could hit $15 billion. As to which exchange might be home to the shares, or how many shares will be offered, that remains to be seen when the firm’s documentation comes through, which those same unnamed sources said might happen next month.
So: Much remains to be seen when the SEC documentation comes through, including Klarna’s own current estimation of market size, potential and a more recent spate of financials. But then again, the stars are aligning for what might prove to be a timely listing, because some of the fundamentals clearly have momentum.
A $15 billion valuation would mark an increase from the $14.6 billion valuation that had been seen as recently as the end of last year, implied by the latest funding round, and well above the $6.7 billion seen in 2022.
The latest financial disclosures from Klarna detail that from January through September (the first three quarters of the year), gross merchandise value (GMV) surged 16% to 795 billion SEK ($72.7 billion), and revenues were up 23% to 20.3 billion SEK ($1.86 billion).
Transaction and service-related sales revenues grew slightly faster, by 25% to 17.2 billion SEK ($1.57 billion). And adjusted operating income stood at 1.2 billion SEK ($109.7 million), in part due to its harnessing of AI to cut down on operating expenses. The company noted that growth in the United States was 33% year over year. At the time of the financial disclosure, the company said that it was targeting a $450 billion revenue opportunity in the “serviceable addressable market for payments.”
Klarna has been expanding its reach: As PYMNTS reported earlier this year, businesses across 25 countries that use Stripe’s financial infrastructure platform now have been enabled to offer Klarna’s payment options to their customers.
There’s a read-across to be gleaned from Affirm’s own results, which received the Wall Street equivalent of a cheer, as investors sent the shares rocketing more than 21% on a day when markets were broadly lower. PYMNTS reported Thursday (Feb. 6) that revenues were up 47% to $866 million in the most recent quarter, while GMV was 35% higher, to $10.1 billion.
There’s still a wildcard, in the fact that the regulatory landscape has been what might be charitably defined as “fluid.” Last year, the CFPB issued an interpretive rule classifying BNPL with pay-in-four options as credit providers. Part of the rule, which took effect in July, mandates that providers issue periodic billing statements and offer similar dispute investigation and resolution processes.
A trade group that represents several FinTechs, Klarna among them, sued the CFPB, alleging that the regulations are ill-fitted for the industry and impossible to embrace, and require significant operating costs to be incurred. But now that the CFPB has taken a pause from all manner of rule-making and enforcement efforts, and its ultimate future is uncertain, is it hard to predict what will happen to rule-making that has impacted the BNPL sector.
Beyond the tumult on Capitol Hill, PYMNTS Intelligence has detailed that 56% of consumers used installment payment options in the last year. More than three-quarters of BNPL have said they are highly satisfied with the experience.
Klarna’s journey toward its IPO has long been rumored, and a few weeks’ wait may determine whether rumor becomes reality.