Countdown to Klarna's IPO: CEO says Klarna has the potential be a trillion-dollar company

Countdown to Klarna's IPO: CEO says Klarna has the potential be a trillion-dollar company
Klarna Valuation History

Good morning FinTech Fanatic!

Today's highlight circles around Klarna's chief, Sebastian Siemiatkowski, who recently checked off his 'three tick boxes' that set the stage for the company's much-anticipated IPO.

With all systems go, Klarna is steering towards a public debut that could make waves as early as next year.

Amidst swirling rumors, Klarna has been the hot topic for potential listing venues, with both London and New York whispered as front-runners. Yet, the intrigue deepens as there's no clear lead on the final choice. The company's recent maneuver to establish a UK-based holding entity is stirring speculations of a British IPO, although Klarna remains tight-lipped about its geographical leanings.

This restructuring aligns with Siemiatkowski's strategic vision for IPO-readiness, post a profitable quarter that marks a pivotal shift from red to black. The Klarna captain has always maintained a trio of IPO prerequisites: a global footprint with a solid foothold in the US market, a sustainable and profitable business model, and the promise of substantial growth on the horizon—a trifecta that now stands fulfilled.

So what's Klarna worth now? According to TechCrunch journalist Alex Wilhelm, the company is worth around 3x its current top line.

"A look at the trailing price-sales multiples of major public fintech companies Block and PayPal gives us ratios of 1.42x and 2.16x, respectively. That said, Block’s revenue increased 16% in the third quarter (exclusive of bitcoin trading revenue), while PayPal’s net revenue rose 8% in the last year. So, Klarna is growing its top line faster than either of these two companies and is not priced too far above them if you go by this metric."

In an interview with Josh Lipton for the Yahoo Finance Invest conference, Siemiatkowski reiterates that "Klarna is challenging the retail bank industry. This is a trillion dollar market opportunity, so there is very much real potential that this business could be worth hundreds of billions of dollars, if not trillion, if we accomplish what we set out to do."

Watch the video below to learn how Siemiatkowski views rival buy now pay later firm Affirm (AFRM) and if the company could go public in the US:

As Klarna tastes profitability, the tech sector watches with bated breath, especially after last year's downturn led many fintech firms to press pause on public offering plans. Yet, the tide may be turning. With the likes of Monzo, Starling, and Thought Machine also inching towards the public sphere, the market is ripe with anticipation.

What's certain is that Klarna's leap into profitability, its strategic cost-cutting, and a decline in customer defaults signal a robust quarter and a potentially stronger future. Only time will tell where this fintech titan will anchor its IPO aspirations.

At what valuation and where do you think Klarna will/should IPO?



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