Setback for Klarna: Stock Price Falls Below IPO Price

The Swedish payment service provider Klarna is experiencing an unexpected downturn following its spectacular IPO in September. The shares of the digital financial company fell below the issue price of 40 US dollars for the first time, attributed to increased competitive pressure and uncertainties regarding future interest rate policies. Klarna raised about 1.58 billion US dollars at its IPO, with strong demand from investors for its shares. The pressure on the stock results from a pause in the boom of U.S. tech stocks, triggered by overwhelming economic data that question the assurance of future interest rate cuts by the Federal Reserve. Particularly for growth companies, low interest rates are crucial due to their high capital needs. According to Diksha Gera, an analyst at Bloomberg Intelligence, fintech stocks like Klarna are sensitive to macroeconomic factors such as interest rates and regulatory developments. Fintech pioneer Affirm and payment company Block have also recently recorded losses. Despite the Fed's interest rate cuts, delayed or absent rate moves could weigh on valuations, as higher yields could increase the financing costs of these companies. Klarna's decline occurred as competing fintechs like Stripe and Revolut made headlines with rising valuations. Stripe is now valued at 106.7 billion US dollars, while Revolut is targeting 75 billion US dollars. Even Checkout.com, another European competitor, recently announced a new valuation of 12 billion US dollars. Although Klarna was among the hottest U.S. IPOs of the year—alongside companies like the cryptocurrency firm Circle and the software company Figma—the initial hype quickly faded. The shares have fallen by about 13% since their opening, while the S&P 500 Index recorded an increase of over 1% in the same period. Klarna CEO Sebastian Siemiatkowski is also facing the challenge of strategically advancing his company. The revenues from Klarna's "fair finance" offerings, which make larger purchases financeable over longer periods, increase the pressure to form additional provisions for loan defaults.