Unlock the Editor’s Digest for free
Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.
There are generally two reasons a company might go public when market conditions are difficult. Either it really needs the money, or it thinks there is a decent chance things are going to get even worse.
Klarna, the Swedish fintech group that offers buy now, pay later services for consumers, is pushing ahead with an initial public offering in New York, even though the market is tough. The S&P 500 index is down almost 4 per cent so far this year, while volatility measures such as the Vix have jumped. Technology and consumer stocks — two classic drivers of the IPO market — have been hard hit. Klarna’s peer Affirm is down more than 15 per cent in 2025.
So why rush out now? Klarna does not obviously need the money — it has an investment grade credit rating and a banking licence that lets it fund the vast majority of lending through cheap consumer deposits. Some other groups, such as Chime and Genesys, are reportedly waiting for calmer conditions.
True, Klarna’s profitability makes it look a safer bet than many new listings. Not every company would even be able to contemplate a deal in these market conditions. But there is also a risk that by the time the broader stock market stabilises, the company’s own prospects will look worse. Klarna’s focus on short-term interest-free loans means it is influenced by different dynamics than most financial groups. Shifts in interest rates, for example, have relatively little impact, according to the IPO prospectus.
Consumer spending is the biggest macroeconomic driver of Klarna’s fortunes. Its biggest source of revenue by far — almost 60 per cent of the total in 2024 — is fees paid by retailers on each sale that goes through the buy now, pay later provider. The more people shop, the more money it makes.
Right now, however, consumer confidence is tumbling across several of its most important countries. Klarna is particularly exposed to spending on discretionary items such as clothing. Shares in large customers such as H&M, Inditex and On Holding have been under pressure. The UK economy unexpectedly shrank in the first month of the year, while in the US, the closely watched University of Michigan Consumer Sentiment Index is at its lowest level since November 2022.
The worst-case scenario for Klarna would be a serious downturn that led to a jump in customers not paying what they owe; but even a more modest spending slowdown would jeopardise its current growth rates, a problem for a company hoping to be valued like a fast-growing tech group.
When Klarna was first taking off in the UK, it advertised its offering with a series of videos and posters of satisfyingly “smoooth” images, such as a pencil being pushed into a jelly. Customers may still appreciate Klarna’s smooth approach to payments — but investors should not bank on life as a public company being equally frictionless.
nicholas.megaw@ft.com
