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Klarna chooses New York over London for much-anticipated IPO

London has lost out to rivals on other blockbuster flotations including that of UK chip maker Arm, which opted to list on Wall Street in August 2023. Photograph: Andrew Kelly/Reuters

 

The buy now, pay later company Klarna has filed for a much-anticipated flotation in the US, a move that marks another blow for the London market.

The Swedish fintech firm confirmed on Wednesday morning that it had “confidentially submitted” an application to the US Securities and Exchange Commission “relating to the proposed initial public offering of its ordinary shares”.

Klarna, which is one of the world’s largest buy now, pay later (BNPL) companies, said the price range for its proposed IPO and the number of shares that would be offered was yet to be determined. The firm is expected to easily fetch a multibillion-pound valuation.

 

Klarna hit a peak valuation of $46bn (£36bn) after a funding round led by Japan’s SoftBank in 2021. Photograph: Rafael Henrique/SOPA Images/Shutterstock

 

The company, which was founded in Sweden in 2005, hit a peak valuation of $46bn (£36bn) after a funding round led by Japan’s SoftBank in 2021. But a tough period for Klarna, which coincided with a surge in interest rates that led to an industry-wide rerating of tech firms, resulted in the company losing 85% of its value in 2022, when it was last estimated to be worth $6.7bn. That led to hundreds of job cuts as the company shed about 10% of its then 7,000-strong global workforce.

As markets stabilised and Klarna returned to profit, rumours started swirling that the firm was resurrecting its IPO plans.

A decision to set up a British holding company last year sparked speculation that the London Stock Exchange (LSE) was in the running to host Klarna shares, despite UK government plans to regulate the BNPL market. The UK remains the fintech firm’s third largest market, behind Germany and the US.

News that Klarna will take its flotation stateside instead represents another snub to the LSE. London has lost out on other blockbuster IPOs including that of the UK chip designer Arm, which opted to list on Wall Street in August 2023. Companies such as the Paddy Power owner, Flutter, and the travel company Tui announced plans to switch their primary listings from London to rival hubs such as New York and Frankfurt this year.

Kathleen Brooks, the research director at the brokers XTB, said: “There had been speculation that Klarna could list in the UK. However, this is another example of a tech company choosing the US over the UK.”

She said Donald Trump’s second US presidential term could “accelerate that trend, with the prospect of looser regulations and a booming stock market attracting IPOs to the US.”

Klarna has about 3,800 employees worldwide.

Author: Kalyeena Makortoff Banking correspondent

Source: The Guardian

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