Klarna valued at nearly $20 billion as shares jump in NYSE debut

By Arasu Kannagi Basil and Pritam Biswas

(Reuters) - Klarna shares jumped 30% in their hotly anticipated New York debut, valuing the Swedish fintech at $19.65 billion, ending the company's years-long wait for a listing and underscoring a rebound in the broader U.S. IPO market.

The company's shares opened at $52, compared with their IPO price of $40 apiece.

The buy-now, pay-later (BNPL) lender is leading a slate of seven companies, including Winklevoss twins' crypto exchange Gemini, poised to go public in New York by Friday, in what is set to be the U.S. IPO market's biggest week in years.

The strong lineup sets the stage for an eventful fall window after tariff-driven volatility earlier in the year had slammed brakes on a revival of new issues following a near three-year dry spell.

Klarna and several other big names had halted their IPO plans in April after tariff-driven volatility roiled stock markets.

The company and some of its investors sold 34.3 million shares at $40 each, above the marketed range of between $35 and $37. The IPO valued Klarna at $15.1 billion.

"This (going public) is really an opportunity…primarily for new shareholders, our 111 million consumers and others to really partake in that journey to disrupt the financial services industry and be the next generation of personal finance," Klarna Chief Financial Officer Niclas Neglén told Reuters in an interview.

Selling shareholders, including Silicon Valley venture capital giant Sequoia Capital and Danish billionaire Anders Holch Povlsen's Heartland A/S, raised $1.17 billion in the IPO.

CEO Sebastian Siemiatkowski, who owns about 7% of Klarna, did not sell any shares in the IPO.

Klarna is the largest Swedish company to list its shares in the U.S. since Spotify in 2018.

"$15 billion is far from disappointing given it was above Klarna's price range and shows a continuing trend of issuers being conservative in initial valuation expectations to garner investor demand and to hopefully leave them wanting more," said Samuel Kerr, head of equity capital markets at Mergermarket.

At its peak in 2021, Klarna raised funds at a $45.6 billion valuation, which slumped to $6.7 billion a year later amid rising inflation and higher interest rates.

The company had eyed a New York flotation for years, having considered a direct listing - a route that avoids selling new shares and the costs of a traditional IPO - in 2021.

"A strong aftermarket could convince other fintechs to take the plunge into public markets," said Russ Mould, investment director at AJ Bell.

"The danger is that one good deal begets a few more and then a torrent of less good ones follows behind."

BNPL IN FOCUS

Klarna, founded in 2005 when e-commerce was nascent, has since developed into a BNPL heavyweight, helping reshape online shopping with its short-term financing model.

BNPL allows shoppers to pay for products in small installments over time and has gained more popularity since the COVID-19 pandemic.

The business is gaining momentum as customers navigate sticky inflation, labor market cracks, and slowing income growth.

"Klarna's IPO will be a thermometer, showing how hot, or not, investors think BNPL will be," Brian Jacobsen, chief economist at Annex Wealth Management said.

U.S.-based rival Affirm commands a $29 billion market valuation and its shares have surged 45% this year. Its latest quarterly report showed an average order value of $276, compared with Klarna's $101 for the year ended June 30, according to its IPO filing.

While Klarna primarily targets smaller purchases and short-term loans, Affirm has focused on big-ticket purchases with longer zero-interest financing.

Profitable for the first 14 years, Klarna has grappled with losses in recent years as it expanded in the U.S. and other markets.

"Right now, we're more focusing on bringing additional value to our existing user base than the growth of the user base, because the growth has been very, very consistent," Siemiatkowski told Reuters.

BNPL will steadily grab market share from debit cards in coming years, analysts have estimated, as shoppers increasingly embrace the flexibility to spread payments over time.

(Reporting by Arasu Kannagi Basil and Pritam Biswas in Bengaluru and Supantha Mukherjee in Stockholm and Echo Wang in New York; Editing by Sriraj Kalluvila)