Klarna’s IPO Soars Then Fades: What Went Wrong on Its First Day?

TradingKey - Klarna (KLAR), one of Europe’s best-known “buy now, pay later” (BNPL) firms, was among the most anticipated U.S. IPOs of September. Despite raising its offering price significantly and securing over 20x subscription demand, Klarna’s debut saw a sharp pullback after an initial surge, with a final gain of about 15% — far below the explosive rallies seen in recent hot listings like Circle, Figma, and Bullish.

On September 10, Swedish fintech giant Klarna went public on the New York Stock Exchange at an IPO price of $40 per share. It opened at $57.20, briefly surging 30%, but gains steadily narrowed throughout the day, closing up 14.55% at $45.82.

Markets had expected Klarna to ride the momentum of a resurgent U.S. IPO market — where Circle soared 168.48% on debut, Figma jumped 250%, and Bullish rose 83.78%. 

While Klarna still posted a solid double-digit first-day return, its “peak at opening” performance left investors questioning what went wrong.

Who Is Klarna?

Klarna is best known for its “buy now, pay later” service, offering shoppers interest-free installment plans for small purchases. It currently has around 93 million active users across 26 countries. Beyond its core lending role, Klarna is expanding into savings accounts, checking services, and debit cards, aiming to become a full-service financial platform.

However, its push into the U.S. market has come at a steep cost. In the first half of 2025, Klarna reported $1.52 billion in revenue, but a net loss of $153 million.

Affirm: Why Not Just Buy That Instead?

Affirm is Klarna’s main U.S. competitor, and many investors are asking: Why invest in Klarna when Affirm looks stronger financially?

Mizuho pointed out that over the past 12 months (through June 2025), both companies had similar revenues — Klarna: $3.1 billion, Affirm: $3.2 billion — but their profitability diverged sharply:

• Klarna: Net loss of $100 million
• Affirm: Net profit of $52 million

Klarna achieved 14 consecutive years of net profit growth from 2005 to 2018, but its U.S. expansion has disrupted that trend. The company argues that becoming a global player requires a strong U.S. presence, and it has a well-thought-out plan balancing growth and profitability, especially in America.

Business Model Under Scrutiny

Klarna’s core model — offering installment loans for small purchases — is under question. Some investors mock: Do people really need to finance a burrito order?

In response, Klarna CFO Niclas Neglén said this is a better choice for consumers — especially when half of Americans rely on revolving credit.“I think this is a much safer, smarter product than having a revolving credit card that you're paying 30% interest on and barely paying that burrito back over months.”

Still, critics accuse Klarna of encouraging financially vulnerable groups to take on debt, citing the “predatory” nature of BNPL — particularly late fees. In 2024, 13.6% of Klarna’s total revenue came from “reminder fees” and “snooze fees” charged when customers miss or delay payments.

From a macro perspective, slowing U.S. economic growth and rising consumer stress add uncertainty to Klarna’s business model and credit quality.

Has the IPO Boom Already Peaked?

While 2025 is being hailed as a comeback year for U.S. IPOs, recently listed stars like Circle have since fallen sharply, even as the S&P 500 and Nasdaq hit new highs.

As of writing:

• Circle is down 53% from its late-June peak
• CoreWeave has dropped 30% from its high
• Bullish has declined over 41% since listing

Barron’s noted that given the large pops for several of these IPOs, followed by a gradual cooling off in the weeks after the stocks began trading, should investors be worried that history is repeating itself? Is this 2000 all over again?

Unlike 2000, today’s wave of IPOs includes companies that are not yet profitable — such as Klarna and soon-to-list Gemini — while Circle and Figma reported net losses in their first post-IPO quarter. This is a potential red flag.

As one industry insider put it, many IPO pops happen early. If you didn’t get allocated initially and buy in later, your returns may be disappointing.