European fintech firm Klarna has announced plans to go public in 2024. This development has sparked discussions in the industry about the timing and its potential to become one of the biggest Initial Public Offerings (IPOs) of the year.
Founded in Sweden in 2005, Klarna has grown significantly thanks to its ‘buy now, pay later’ business model. Processing an average of 2.5 million transactions daily, the firm has managed to cater to a global base of 150 million customers. This has been made possible through its numerous partnerships—over 250,000 in number—with merchants around the world.
However, Klarna faced a tumultuous period amidst economic instability, inflation, and high interest rates, which escalated borrowing costs in 2022. Consequently, Klarna’s value took a serious hit, plummeting from $45.6 billion to $6.7 billion in 2023.
Klarna’s planned 2024 IPO and recovery
This led to an organizational rethink, focusing on operational efficiency and risk mitigation strategies to boost profitability.
Despite significant setbacks, Klarna remained resilient, leveraging AI technology to bolster its creditworthiness. Implementing this tech solution improved operations, considerably reducing manual interventions and customer inquiries by 25%. Simultaneously, the firm also saw its operating costs decline by 16%.
With discussions underway with investment banks, Klarna’s IPO is projected to reach a valuation close to $9.5 billion. This figure and forecasts of a potential valuation of $20 billion indicate that the market anticipates a favorable response ahead of the IPO.
Klarna’s decision to go public appears strategically sound, considering the increasing consumer preference for the ‘buy now, pay later’ model. If the current market trends persist, Klarna, a leader in the BNPL space, could see significant growth following its IPO.
