Klarna's stock loses some steam in IPO debut, as traders get a fresh play on fintech

By Emily Bary and Mike Murphy

Klarna's IPO comes in the aftermath of strong public debuts from Figma and Circle

Klarna will be listed on the New York Stock Exchange.

Companies with name recognition have been well received in their Wall Street debuts lately. Klarna Group PLC didn't make quite the same debut, but it still saw its stock rise on its first day of trading.

Shares of the financial-technology company opened at $52, 30% above their initial-public-offering price of $40. While Klarna's stock (KLAR) traded as high as $57.20 shortly after the open, it finished at $45.82, below the opening price but still up 14.6%. The debut, while successful, lacked the sizzle of Figma Inc.'s (FIG) from July, as that stock more than tripled from its offer price.

Klarna's stock priced late Tuesday, well above its expected range of $35 to $37.

Klarna, which was founded in Sweden but recently "redomiciled" to the U.K., started trading on the New York Stock Exchange on Wednesday under the ticker symbol "KLAR."

In recent months, Figma and Circle Internet Group Inc. (CRCL) both saw their stocks pop in their trading debuts in a sign of strong appetite for IPOs, and also a sign that underwriters left money on the table. Those stocks have come down from their highs, however.

Read: Klarna leads busiest week for big IPOs in four years. Will newly public stocks stay hot?

Klarna is following in the footsteps of fellow fintech player Affirm Holdings Inc. (AFRM), which went public in early 2021. Affirm's stock has been volatile since its IPO and is trading nearly 50% off its pandemic-era peak of $168.52. But Affirm shares have seen momentum recently as the company's profit profile has improved and as new products have resonated. Affirm has a $28 billion market capitalization.

Both companies offer buy-now-pay-later services - and more. Klarna Chief Financial Officer Niclas Neglén said the company is trying to become known as an "everyday spending partner." Klarna users not only finance purchases but have the option to pay in full through means like direct debit from bank accounts or their choice of card.

Klarna is trying to become more entrenched in consumer spending habits, through its own new debit card and other financial products. The debit card lets people make purchases both online and offline and choose whether to finance them or not. Neglén said that's a way of further penetrating everyday spending and smaller purchase sizes. Less than two months after launching the card, Klarna has a waiting list of 5 million customers, he added.

"We've come to a point where we have the scale that people really understand and know us, and we have the partnerships and we have the loyalty of consumers," he said.

From a partnership standpoint, the company sees intriguing opportunities to work with payment-service providers like Stripe and Worldpay. That means that when merchants sign up with those payment-service providers, Klarna can be part of the standard package alongside Visa Inc. (V) and Mastercard Inc. (MA), instead of being an add-on service. That "obviously makes us more ubiquitous," Neglén said.

Klarna and Affirm have taken different routes in their BNPL businesses, with Klarna focused more on things like "pay in four" payment options that let people split purchases into installments and Affirm opting more for interest-bearing offerings.

What that has meant is a better profit profile for Affirm relative to Klarna, said Mizuho's Dan Dolev. While the companies brought in similar amounts of revenue in the 12 months that ended in June - $3.1 billion for Klarna and $3.2 billion for Affirm - Klarna posted a $100 million net loss while Affirm notched $52 million in net income.

See also: Will Figma's stock keep riding the AI hype? Wall Street isn't so sure.

Klarna said in its IPO prospectus that it has enacted a "deliberate balance of growth and profitability," specifically in regards to its entry into the U.S. market. The company ran up 14 consecutive years of positive net income from 2005 to 2018 before splashing into new markets like the U.S. that required bottom-line tradeoffs.

"It was very important for us before the IPO to truly be a global company, and to be a global company you need to have a base in the U.S.," Neglén said.

While Klarna isn't profitable by IFRS standards - the international equivalent to GAAP - the company said it generates a positive transaction margin, which is a payment-industry metric that measures revenue minus transaction costs.

The company bills itself as a more consumer-friendly alternative to banks that offer revolving-credit products. In a letter included in the prospectus, Chief Executive Sebastian Siemiatkowski said that banking "is about trust," but that traditional banks have instead profited from "late fees, overdraft penalties, revolving-debt traps and countless other tricks designed to exploit their customers."

As BNPL products have gained steam and made their way down to smaller transaction sizes, companies like Klarna have taken flak from those in the investment community who wonder, in a somewhat tongue-in-cheek way, whether it's actually a good thing that people have the ability to split purchases as small as burrito lunch orders into installments. But Neglén sees Klarna as a better option, especially as he says half of all Americans rely on revolving credit for purchases.

Read: Are bonds based on burrito orders next after the Klarna and DoorDash partnership?

"I think this is a much safer, smarter product than having a revolving credit card that you're paying 30% interest on and barely paying that burrito back over months," he said.

-Emily Bary -Mike Murphy

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09-10-25 1634ET