Klarna, the Swedish fintech giant, is aiming for a New York IPO with a share price of $35-37, valuing the company at nearly 130 billion SEK. Despite its rapid growth, analysts like Lars Frick from Aktiespararna view it as a high-risk stock due to its current low profitability and ambitious expansion plans. The competitive landscape, including rivals like Tink and Revolut, adds to the challenge. However, the IPO offers Klarna increased capital access and visibility.
Klarna's Ambitious New York IPO: A High-Risk Investment?
Klarna's Ambitious New York IPO: A High-Risk Investment?
The share price that Swedish fintech company Klarna is targeting for its New York IPO seems expensive, according to Lars Frick, head of analysis at Aktiespararna.
– A high-risk stock, he says.
Klarna – a major and rapidly growing player in the online payments market – is aiming for a New York IPO, likely at the beginning of next week, according to information obtained by Bloomberg.
"Quite a Lot of Money"
According to the prospectus Klarna submitted to the U.S. Securities and Exchange Commission (SEC), the company is targeting a share price of $35-37 per share, which values the entire company at just under 130 billion SEK.
– I think it's quite a lot of money for Klarna. I see Klarna as a successful financial intermediary, and this is quite expensive, he says about the price.
To justify the share price the company is aiming for, Klarna's ambition to become more than what it is today must be fulfilled, according to Frick.
– And they want to broaden themselves, from being a link in the payment chain, a layer in transactions. They have much bigger ambitions. And Klarna might also become a new way to pay, replacing credit cards. If they succeed, this valuation is not particularly high, he says.
In summary, it can be called "a high-risk stock," according to Frick.
– That's fair to say. They don't make much money today. The entire valuation hinges on the future.
"It Will Probably Be Quite Tough"
The competition in the segment where Klarna operates is tough, with players like Tink, Revolut, and Affirm, as well as traditional banks with their credit and payment services, according to Frick.
– It will probably be quite tough for Klarna. They need to stay on their toes, be innovative, and continue to invest to outpace new competitors while also taking market share from established services.
He is not surprised that after 20 years of rapid expansion in private ownership, Klarna is now going public.
– Quite a few have become quite wealthy on paper with Klarna, who now want to see real money.
– Access to capital and visibility are two strong motives as well.
On the stock market, the demands for openness and transparency from both authorities and media increase. And if you don't deliver what is expected or better, patience can disappear overnight among investors, according to Frick.
– But obviously, Klarna's owners see that the advantages outweigh the disadvantages – better access to the capital market and better visibility.