The US stock IPO market continues to heat up! Klarna surged 43% on its first day of listing

According to Zhitong Finance APP, financial services company Klarna Group (KLAR.US) saw its stock rise as much as 43% on its first day of trading, ultimately closing up 14.55% at $45.82. The stock was priced at $40 per share for this offering, above the market pricing range, and received a double-digit oversubscription, with about half of the potential subscribing investors going home empty-handed. The company and some of its investors raised $1.37 billion through the initial public offering (IPO), indicating that there is still room for growth in the new stock issuance market.

Based on the closing price, Klarna's market capitalization exceeds $17 billion (based on the number of shares outstanding). Although stock options and warrants will add some valuation, it has still significantly shrunk compared to the peak of $45.6 billion driven by the online shopping boom during the pandemic in 2021. The pressure from inflation and rising interest rates on global fintech business models—including Klarna's position in the "buy now, pay later" service—led to a dramatic drop in the company's valuation during a round of private financing in 2022, down to $6.7 billion from the previous year.

For Klarna CEO Sebastian Siemiatkowski, this IPO solidifies the evolution of Klarna's business beyond its "buy now, pay later" foundation. The company emerged during the e-commerce surge during the pandemic and has actively expanded into other banking products such as savings, checking accounts, and credit cards in recent years.

Sebastian Siemiatkowski stated in an interview, "Investors are finally almost no longer asking about 'buy now, pay later,' which is great because it shows that Klarna's transformation and success have been recognized. We are not just 'buy now, pay later'; we offer various payment methods, as well as debit cards, and a range of retail, banking, and financial services."

The company, headquartered in Stockholm, has been expanding its "fair financing" products, allowing customers to repay large item purchases over a longer period. While this has driven growth in net interest income, it has also weighed on performance due to the need to set aside higher potential credit loss reserves for such long-term loans. According to early documents submitted by Klarna to the U.S. Securities and Exchange Commission (SEC), these loans currently account for only about 2% of the company's total transaction volume. However, with the number of merchants offering such fair financing loans doubling over the past two years, the company expects this proportion to grow.

Klarna has been preparing for its IPO over the past year. However, when the company was preparing to go public earlier this year, the so-called reciprocal tariffs announced by U.S. President Trump caused market turmoil, throwing the IPO plans into chaos.

Sebastian Siemiatkowski paused the issuance until it was recently restarted. He noted that one of the most memorable experiences during the roadshow was when a member of an investor team approached him to apply for a Klarna credit card. The 43-year-old CEO recalled, "The security personnel said, 'Oh, you are from Klarna? I want to get a card. I'm on the waiting list. Help me get one.' I thought that might have been the most exciting moment of the whole process." IPO Market Heats Up

Klarna's listing comes at a time when the U.S. IPO market is heating up, with stocks of companies including Circle (CRCL.US) and Figma (FIG.US) soaring on their first day of trading. Data shows that with Klarna's IPO, this year's initial public offerings (excluding closed-end funds and other financial instruments) have raised $25.7 billion, up from $20.4 billion in the same period of 2024.

In addition to Klarna, the cryptocurrency exchange Gemini Space Station Inc., backed by billionaire Winklevoss twins, engineering company Legence Corp. supported by Blackstone Group, and Black Rock Coffee Bar Inc. are also pricing their IPOs this week.

Klarna and some shareholders sold 34.3 million shares at a price of $40 per share. Among those selling shares are executives, co-founder Victor Jacobsson, entities related to Sequoia Capital, and Danish billionaire Anders Holch Povlsen's Heartland A/S, which collectively sold 29.3 million shares.

Sebastian Siemiatkowski stated in an interview that Klarna itself only sold about $200 million worth of stock, as the company is already "self-sustaining" at the capital level. He added that the purpose of going public is to make stock trading more orderly than in the private market. He said, "We have had 20 years of private investors and employees investing in shares—over time, tracking these private transactions in Google Sheets has become very cumbersome."

According to filings, Klarna reported a net loss of $153 million and total revenue of $1.52 billion for the six months ended June 30, compared to a net loss of $38 million and total revenue of $1.33 billion in the same period last year.

The filings show that Sequoia Capital is expected to hold about 22% of the voting rights post-IPO. Povlsen's Heartland will hold about 8.9%, Jacobsson about 8.8%, and Sebastian Siemiatkowski about 7.4%. Sequoia Capital has realized a gain of $2.7 billion on its initial investment through this IPO. The company's stake was valued at $3.2 billion when Klarna was priced on Tuesday, yielding more than six times the return for this venture capital giant