Klarna, a leading buy now pay later (BNPL) finance company, has reached a significant milestone in its journey towards a stock market flotation with an expected valuation of $20 billion (£15.9 billion). Sources have informed that the Stockholm-based consumer credit provider has received approval from shareholders and regulators to establish a new UK-registered holding company.
Investors were informed earlier this week that the necessary approvals have been obtained as part of preparations for a high-profile initial public offering (IPO). This will result in their Klarna Holding shares being exchanged for Klarna Group plc stock in approximately ten days.
Although no investment banks have been appointed for a New York flotation yet, sources close to the company have revealed that the first quarter of 2025, after the next US presidential election, is the most likely timeframe for the IPO to take place.
Last year, Sky News reported that Klarna was in the process of setting up a new British holding company in order to facilitate a public share sale. The company, which has a workforce of 5,000 and over 150 million customers worldwide, has been considering this move for some time. In January, founder and CEO Sebastian Siemiatkowski stated that the listing was expected to happen “quite soon.”
The decision to establish a holding company in the UK was made in recognition of the country’s strong legal, regulatory, and capital markets framework, sources revealed last year. However, the company’s decision to list in the US will come as a disappointment to the London Stock Exchange, which had been advocating for Klarna to go public in the UK.
In 2022, Klarna’s valuation was slashed to $6.7 billion (£5.3 billion) in a funding round, after previously being valued at $46 billion (£36.6 billion). Investors such as SoftBank’s Vision Fund, Sequoia Capital, and Mubadala, the Abu Dhabi sovereign wealth fund, have backed the company.
According to bankers, based on a comparison with New York-listed competitor Affirm Holdings, Klarna should receive an IPO valuation of between $15 billion and $20 billion.
Klarna’s corporate reorganization comes after the UK government appeared to back away from plans to regulate the BNPL sector. Last July, Sky News reported that the government was considering shelving new legislation in favor of incorporating future regulations into a reformed Consumer Credit Act. This decision, which has yet to be announced by the government, was met with outrage from consumer campaign groups.
In response to the rapid growth of BNPL products, the Financial Conduct Authority announced contract changes last autumn to provide better protection for customers. Research from the City watchdog revealed that in the second half of 2023, 27% of adults (approximately 14 million people) had used BNPL at least once.
Klarna has previously stated its support for “proportionate” regulation of the sector. Last year, the company launched Britain’s first ‘credit opt-out’ product, which gives consumers greater control over their finances. This idea was suggested by Andrew Griffith, then City minister, during a meeting with Mr. Siemiatkowski.
A spokesperson for Klarna confirmed on Tuesday, “Following our announcement last year, yesterday we notified investors that we have received the necessary investor and regulatory approvals to set up a new UK-based holding company.”
