2 Broken IPOs That Can Bounce Back in 2026

Two 2025 IPOs, StubHub and Klarna, are trading below their offer prices but show operational momentum that could support a recovery in 2026. StubHub reported an 8% revenue increase in its latest quarter and trailing revenue of $1.8 billion versus $211.6 million in 2019; it IPO'd at $23.50 for an $8 billion valuation and now has a $4.3 billion market cap, with analysts projecting $1.23 EPS next year (~10x forward earnings) and a projected 47% revenue jump in 2026. Klarna, down ~22% from its $40 IPO, posted 28% revenue growth (25% like-for-like) and $903 million revenue on $32.7 billion GMV last quarter, while pushing AI-enabled merchant integrations; near-term regulatory risk includes recent UK moves to curb ticket resale above face value that could affect StubHub's seller activity.

Analysis

Market structure: StubHub (STUB, market cap ~$4.3B) and Klarna (KLAR) benefit from scale: STUB’s trailing revenue ~$1.8B and 19% GMV growth give it unit-economy leverage vs smaller ticket rivals (SEATW, private brokers) while Klarna’s $903M revenue on $32.7B GMV demonstrates take-rate volume economics. Losers include smaller resale platforms and marginal ticket brokers if regulation raises compliance costs; Live Nation (LYV) faces competitive pressure on secondary channels and pricing power. Cross-asset signals: equity volatility likely to outpace credit moves (IG spreads immaterial), modest FX exposure for KLAR (EUR/GBP/USD flows), and elevated options implied vols for both names into earnings/regulatory windows.

Risk assessment: Tail risks include a UK statutory ban on above-face resale (weeks–months timeline) cutting STUB’s seller activity, rapid consumer-credit regulation or a spike in BNPL delinquencies reducing KLAR’s take-rate cashflows, and a macro recession hitting discretionary live-event spending (loss of >15% GMV). Immediate (days) risk = earnings/IPO lockup flows; short-term (3–6 months) = regulatory milestones; long-term (12–24 months) = consolidation or margin expansion. Hidden dependencies: merchant partnerships, payment-network fee changes, fraud/chargebacks and FX translation for KLAR.

Trade implications: Direct plays — establish a 2–3% long position in STUB within 30 days, target 12–18 month hold to capture re-rating to 12–15x forward EPS if FY2026 revenue grows ~40–50%; set hard stop at -25%. Add 1.5–2% long in KLAR (12 month) conditional on sustaining >25% revenue growth and stable loss rates; trim if NET charge-offs rise >200bps. Pair trade — long STUB / short LYV equal notional for 6–12 months to play secondary-market share shift. Options — buy 9–12 month call spreads on STUB (buy 30-delta, sell 15-delta higher strike) to limit premium while capturing asymmetric upside.

Contrarian angles: The market may be over-discounting network effects and AI-driven merchant onboarding that lock merchants into Klarna and increase STUB GMV stickiness; STUB is ~50% off IPO despite a projected FY1 P/E ~10x, implying expectation of severe GMV loss that is low-probability absent regulatory action. Historical parallel — post-2021 experiential rebound shows demand can re-accelerate sharply; unintended consequence — strict resale caps could force volume onto compliant, regulated marketplaces (benefit incumbents), increasing barriers to entry and favoring STUB and KLAR if they absorb compliance costs quickly.

Key Decisions for Investors

• Establish a 2–3% long position in STUB within the next 30 days (size to portfolio), target 12–18 month hold; take-profit at +40–60% or when forward P/E re-rates to 12–15x FY2026; stop-loss at -25% from entry.
• Establish a 1.5–2% long position in KLAR (USD-denominated ADR exposure) with a 12-month horizon; add +0.5% if quarter-over-quarter GMV acceleration >5% and delinquency rate change <+100bps; trim half position if regulatory capital rules increase CET1-equivalent requirements or take-rates fall >20bps.
• Implement a relative-value pair: long STUB / short LYV equal notional for 6–12 months to capture secondary-market share gains; hedge beta by sizing short to match 0.9–1.1x historical 60-day beta ratio and review monthly.
• Buy a 9–12 month STUB call spread (buy ~30-delta, sell ~15-delta higher strike) sized to 0.5–1% portfolio risk to capture upside while capping premium; execute only if implied volatility is <40% to keep max cost acceptable.
• Monitor regulatory triggers over next 30–90 days: UK resale legislation calendar and FCA BNPL consultation milestones; if a draft ban emerges, reduce STUB exposure by 50% and shift capital to Klarna/other fintech names with diversified merchant exposure.