Klarna looks to IPO at valuation that could hit $14B: report

Swedish fintech Klarna is reportedly preparing for a US IPO in September, targeting a valuation of $13 billion to $14 billion, a significant reduction from its $50 billion aim in 2021, following previous shelved attempts. Despite this, the company reported robust Q2 performance, with revenue up 20% to $823 million and active customers increasing 31% to 111 million, alongside an adjusted operating profit of $29 million. Shares could be priced as early as this week at $34-$36, with recent successful tech IPOs potentially indicating a more favorable market for its debut.

Analysis

Klarna is reportedly advancing with a US initial public offering in September, targeting a valuation between $13 billion and $14 billion. This valuation represents a significant recalibration from the $50 billion target sought in 2021, reflecting a broader market correction for high-growth technology firms. Despite the lowered valuation, the company's fundamentals show positive momentum, with second-quarter revenue growing 20% year-over-year to $823 million and the active customer base expanding 31% to 111 million. Profitability, a key investor focus, is emerging, evidenced by an adjusted operating profit of $29 million, a $1 million improvement from the prior year. The potential IPO is set against a backdrop of previous postponements due to market jitters, but also a currently buoyant market for tech IPOs, highlighted by the strong post-debut performance of companies like Figma and Circle, which could signal receptive investor sentiment.

Key Decisions for Investors

• Investors may consider the revised $13B-$14B valuation an attractive entry point, given the company's robust 20% revenue and 31% customer growth, especially when compared to the much higher 2021 valuation.
• A critical consideration is the company's thin profitability, as an adjusted operating profit of $29 million on $823 million in revenue suggests margin pressure and a long path to significant earnings.
• The history of postponed IPOs due to market volatility indicates a sensitivity to macroeconomic conditions, which remains a key risk factor to monitor leading up to and following the listing.
• Given the precedent of extreme post-IPO price surges in recent tech listings, investors should be prepared for significant volatility and may want to watch initial trading dynamics closely before establishing a full position.