Klarna, the millionaire Swedish payment solutions provider, took Wall Street by storm just a little while ago. Their first act of transparency propelled them to a jaw-dropping $19 billion valuation! Founded in 2005, the company has seen explosive growth. Today, it’s a hub for innovation and home to one of the world’s leading financial technology sectors. With approximately 93 million active users across 26 countries, Klarna continues to expand its reach, particularly in the UK and US markets.
Klarna came to the UK market in 2014 and set up in the US in 2019. The artists’ company has been an extraordinary force for change in Sweden. Last year, 80% of adults who paid through Klarna didn’t use a Klarna product! During the last fiscal year, the firm posted $2.8 billion in revenue, an impressive 24% jump over last year’s results. Despite double and triple-digit percentage revenue increases, Klarna lost a staggering $52 million in the three months ending in June. This loss represents a substantial jump from the $7 million loss posted for the same period last year.
The company builds on its alternative payment model, making it easier for shoppers to make their purchases in smaller, interest-free installments. Klarna makes the bulk of its revenue by collecting merchant fees on purchases made using its “pay later” option. Despite these challenges, this business model has been hugely successful. This move has increased transaction processing costs, starting with its launch into the US market.
In its IPO, Klarna initially raised $1.37 billion, and achieved a $45.6 billion valuation with shares priced at $40 a share. When trading began, shares immediately jumped to $52/share, a 30% premium on the initial price. This positive reception from the market proved to be a strong boost for Klarna’s $15 billion valuation at the time of its IPO.
Sebastian Siemiatkowski, Klarna’s chief executive, said after their debut that he was excited about the future of the company. Industry experts note that Klarna’s positioning as a payment company rather than a traditional lender could contribute to its ongoing growth and success.
“In our view it’s more of a payment company than a lender.” – Joachim Dal
Analysts view Klarna’s entrance into the public market as a sign of changing tides throughout the public technology space. Mr. Dal noted the importance of Wall Street to technology companies – many of which would like to list their stock and go public.
“For any company in the technology sector that is looking to go public, there is only one market and that is the market on Wall Street.” – Mr. Dal
He went on to stress that Wall Street plays an essential role in providing liquidity. It provides deep coverage by equity analysts and peer public companies, which increase valuations.
