Klarna, the giant Swedish fin-tech, is set for its most awaited debut this week on Wall Street targeting a $14 billion valuation. This would be both a comeback and realization of a rude shock. The buy now pay later (BNPL) pioneer had once soared to an extraordinary valuation peak of $45.6 billion in 2021 and sagged as much as 85% plunging to $6.7 billion by 2022 due to rising interest rates and regulatory pressures. Now shares are priced between $35-$37 on the New York Stock Exchange under ticker “KLAR” and investors ask the question: is it the bottom, or just another stop on the way down?
Strong demand in the market
Such overwhelming bidding for the IPO, which is claimed to have been oversubscribed by as much as 15 times and guidance indicating potential pricing at the high or perhaps even higher end of the range, suggests to institutional investors that they see huge potential value in where Klarna stands at the moment, not least because it is dealing at an approximate value half that of its main U.S. competitor, Affirm Holdings, which boasts a total market capitalization of $28 billion.
The recent financial performance of Klarna indicates growth, but profitability challenges. The firm realized Q2 2025 revenue of $823 million, raking in its fifth consecutive quarter with operational profit, adjusted operating income of $29 million. Also, net losses widened from $18 million in the previous year to $53 million, mainly due to a sudden surge of 64% in credit provisions to $174 million after the company set aside more funds for potentially souring loans.
The arena of challenge from competitive landscape
Klarna has some impressive scale metrics-it claims 111 million active users and gross merchandise volume of $112 billion for the preceding 12 months-but lacks behind competitors in monetization efficiency. Affirm, for example, mobilizes about as much revenue as Klarna does while processing three to four times as much transaction volume.
While the industry faces headwinds from rising interest rates, the underlying business model economics have deteriorated further for the BNPL segment. Credit losses are rising within the industry due to an increasing number of defaulters among consumers, while regulatory scrutiny is intensifying. Klarna’s realized credit losses, which improved to 0.45 percent of GMV in Q2 2025 from 0.48 percent the previous year, are being significantly uplifted in terms of provisioning, indicating possible further deterioration.
Investment risks exceed opportunities
As per some red flags, an investor looking forward to investing in KLAR should be cautious. The dual-class share structure has caused an effective concentration of voting power among the various existing shareholders, including CEO Sebastian Siemiatkowski. Also, investors who will invest in the public offering will not receive much of the governance rights. As a foreign private issuer, Klarna is also exempt from many of the disclosure requirements that apply to U.S. companies.
Most worrisome are the moments of this IPO, which appear mainly to serve as an exit for early investors instead of fuelling growth. That more than 80 percent of the shares in the offering are sold by existing shareholders rather than the company raising capital to expand, indicates insiders are eager to cash out at current valuations.
Proceed with extreme caution
The case for investment remains weak, despite investor demand and Klarna’s leading position in a European BNPL market. Continuous losses and rising credit provisions make it weak to be ranked at such a high level. Even as its $14 billion valuation currently seems steep, it is probably not too high. Certainly, the discount to Affirm would seem appealing, but it will probably be more indicative of genuine concern over Klarna’s road toward sustainable profitability rather than a bargain opportunity.
These structural problems-their regulatory pressures, rising funding costs, and increasing credit losses-pose a difficult environment for investment into the BNPL sector. Most prudent investors would rather watch how Klarna’s shares perform as a public company and what will be achieved in terms of consistent profitability before putting any down. The conditional mixed financial results and the insider-heavy nature of this offering indicate that this IPO is more about providing liquidity to existing stakeholders than creating value for new investors.
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