Klarna delays US initial public offering due to turmoil in markets caused by Trump's tariffs.
Spicy Take on Klarna's IPO Delay: When the Market Goes Sour
The latest casualty in the initial public offering (IPO) market is Sweden's Klarna, the Buy-Now-Pay-Later (BNPL) kingpin. Ben Dummett and Joe Wallace of The Wall Street Journal report that Klarna postponed its much-anticipated flotation following a barrage of bad news.
Originally targeting a $15 billion valuation on the New York Stock Exchange, Klarna's decision comes in the wake of declining market valuations for rivals like Affirm. Affirm saw a 15% drop in its market value on April 4, nearly halving to $12 billion in 2022. Talk about a rough ride.
The dismal performance of Affirm and its rivals may have given Klarna "second thoughts" about entering the stock market, as suggested by Pymnts. But there's more to the story than just a competitor's misfortune. Trade wars unleashed by the former President could potentially squeeze consumer spending, which would be a significant blow to Klarna's short-term loan business. To add fuel to the fire, during bear markets, investors typically focus on companies with a "sexy" history of operating profits, a luxury Klarna doesn't quite possess. According to recent pre-flotation filings, Klarna's losses have been widening, not narrowing, at the company.
Now, let's talk about Klarna's lending wisdom. Stephen Gandel of Breakingviews argues that Klarna's ability to make wise loans may not be as impressive as it seems. While its headline loan-loss rate is a mere 0.47%, banks have been forced to write off 5.2% of credit-card loans. However, Klarna has set aside $495 million to cover potential unpaid debt, which, when looked at another way, reveals loan losses of 5.5% of outstanding balances, slightly worse than the industry average.
The New Kid on the Block
Klarna is the new sheriff in town when it comes to BNPL in the US, but things aren't exactly rosy. Finimize reports that the US market is much less developed than Europe, with only 9.8% of consumers using BNPL compared to 20% in the UK and 33% in Germany. Competition is fiercer, too, with Affirm and PayPal vying for market share. Making matters worse, many US companies offer BNPL for free, which is a significant challenge for Klarna as it might have to sacrifice margin to stay competitive.
Not Alone in the IPO Dock
But Klarna isn't the only company to delay a US listing. Ticketing company StubHub, virtual physical-therapy company Hinge Health, and Israel-based trading platform eToro have also held off on going public. This marks a stark turnaround from early 2025 expectations that the IPO market would "boom" under a "pro-business Republican administration."
So, what's a lender to do? For Klarna, it's a question of innovation, adaptation, and patience. The company is investing in AI-driven improvements to enhance user experience, expanding its presence in the U.S., and forging partnerships with major retailers. Despite recent setbacks, the demand for BNPL services remains strong, with Klarna boasting an impressive 100 million active users. Stay tuned for more updates as Klarna navigates the treacherous waters of the IPO market.
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In the midst of uncertainty in the IPO market, Klarna's delay might be a strategic move to avoid the barrage of tariffs and financial instability that could result from trade wars, which could negatively impact consumer spending.
As Klarna focuses on innovation, AI-driven improvements, and expanding its presence in the U.S., it is also essential for the company to attract investing from the cost-conscious, profit-focused investors who favor technology companies with a proven history of operating profits, to secure the necessary funds for its growth.
