How to Invest in Klarna Stock in 2024

Published Jan 29, 2024

Investor

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Klarna is a Swedish company specializing in buy now, pay later (BNPL) consumer loans.

Here's an example of how it works: instead of making one payment of $280 for a new jacket, Klarna allows shoppers to break it down into four interest-free payments of $70 each, paid every two weeks.

From there, Klarna essentially works like a credit card company — customers who pay on time incur no additional costs, while those who miss payments are charged interest.

While Klarna has yet to go public with its stock, there is still a way to invest in it now.

How to invest in Klarna before its IPO

Klarna is still a private company, which means there is no Klarna stock symbol and no way to buy it in your regular brokerage account.

Interestingly, the SEC has regulations that allow certain types of investors, called accredited investors, to invest in riskier asset classes than retail investors. This includes private companies.

Accreditation requirements

You can qualify as an accredited investor if:

You have an annual income of $200,000 individually or $300,000 jointly.

Your net worth exceeds $1,000,000, excluding your primary residence.

You are a qualifying financial professional.

If you meet at least one of these criteria, the next section is for you.

If you don't qualify as an accredited investor, I cover a few ways to gain indirect exposure to Klarna or invest in the BNPL industry in the second section below.

1. How to invest in Klarna as an accredited investor

You can invest in shares of Klarna on Hiive. Hiive is a secondary marketplace for private, VC-backed companies and their shareholders.

Registering for Hiive will give you access to hundreds of private companies, including Klarna:

There are currently 8 unique listings (asking prices and volume offered) of Klarna stock on Hiive.

On Hiive, you can buy shares directly from Klarna shareholders. This includes employees, venture capital funds, or angel investors. You can either accept the asking price as listed or place bids and negotiate with the sellers.

Additionally, only the sellers pay fees — there are no fees for buying on Hiive.

2. How to invest in Klarna as a retail investor

For retail investors, there are ways to get indirect exposure to Klarna itself, but you're probably better off investing in one of its competitors or waiting for its IPO.

I cover all three below.

Indirect exposure in Klarna

You can get indirect exposure to Klarna by investing in its publicly traded partners:

Visa: In June 2017, Visa (V) partnered with and invested in the company, though the size of the investment is not publicly known. Klarna was valued around $2 billion at the time of the investment.
Macy's: In October 2020, Macy's (M) partnered with Klarna to offer its BNPL services in its department stores. The company also invested an undisclosed amount, likely at a valuation of ~$10 billion.

Although the size of each investment is unknown, I would speculate that both companies invested less than $100 million in Klarna. Given Visa is a $546 billion company, its stake represents a fraction of its total business.

Macy's, however, is a $5 billion company. A $50 million stake in Klarna would make up 1% of its market capitalization. But if you're considering investing in Macy's to get exposure to Klarna, make sure you like the other 99% of its business, too.

SoftBank (SFTBY) has also invested in Klarna. The Japanese company led a funding round that valued Klarna at over $45.6 billion. SoftBank may have invested $150 million, an investment that is now worth closer to $50 million, or 0.1% of SoftBank's market cap.

Invest in its publicly traded competitors

Klarna isn't the only company offering BNPL services.

Affirm Holdings

Affirm Holdings (AFRM) is Klarna's most direct publicly traded competitor.

Unlike Klarna, Affirm does not charge late fees — customers can either pay in four interest-free installments or choose monthly payment plans that do charge interest.

Affirm processed $5.6 billion in transactions in its fiscal Q1 2024 and is valued at $13.6 billion.

Block and PayPal

Block (SQ) and PayPal (PYPL) also have their own BNPL solutions, though these are just segments of their bigger businesses.

Altogether, Block generated $20.8 billion in revenue over the past 12 months and is valued at $41 billion, while PayPal's $29 billion in TTM sales earned it a valuation of $69.6 billion.

Wait for the Klarna IPO

If you're a retail investor who is set on investing in Klarna directly, you should wait for the company's IPO.

While Klarna has yet to schedule official plans to go public, the business has matured and become profitable. It's also restructuring itself as a U.K. holding company.

I would say it will be ready to go public once the IPO market warms back up, though there's one thing that may stop it.

In June 2021, SoftBank and eight other VC firms participated in a funding round that raised $639 million at a valuation of $45.6 billion, as mentioned above.

I'm sure these firms would prefer Klarna to IPO at a valuation north of $50 billion to see a return on their investment, which may keep the company private for longer than it otherwise would be.

When Klarna does have its initial public offering, you'll need a brokerage account to buy its shares. If you're in the market, we recommend Public, where you can open an account for free.

On the platform, you can invest in stocks, ETFs, Treasuries, corporate bonds, cryptocurrencies, and collectibles, all from the same account.

Learn more about Public

Is Klarna profitable?

To date, over 150 million shoppers have chosen Klarna's BNPL service at checkout.

CEO Sebastian Siemiatkowski said Klarna generated a pre-tax profit of $12 million on about $550 million in revenue in Q3 2023. This is a significant improvement from the company's $200 million loss a year prior.

Source: Reuters

Over the years, Klarna has significantly increased the requirements a user must pass to be approved for its BNPL loans. These changes have resulted in a much higher collection rate and fewer losses from loan write-offs.

In addition to charging customers interest and fees on late payments, Klarna charges merchants fees ranging from 3.29–5.99% per transaction. According to Apptunix, this is where the majority of the company's revenue comes from.

Who owns Klarna?

Klarna was co-founded by CEO Sebastian Siemiatkowski, Niklas Adalberth, and Victor Jacobsson in 2005. I suspect these three still own sizable portions of the company.

That said, the company has raised $4.2 billion over the last 19 years. To raise this amount of money, venture capital firms, hedge funds, other corporations, and angel investors likely now own the majority of the company.

Additionally, former and current employees own some portion of the company through stock options and other equity incentive programs.

Klarna valuation chart

After peaking at a valuation of $45.6 billion in June 2021, Klarna's valuation was slashed to $6.7 billion 13 months later, a decrease of 85%.

Here's a look at its valuation history:

Source: Crunchbase

I'm currently estimating Klarna is worth around $16 billion.

Assuming revenue rose 30% YoY in Q4 2023, as it did in Q3, the company would have full-year revenue of $2.2 billion.

Affirm, Klarna's main competitor, is trading at a 7.39x P/S ratio. Using that multiple, Klarna would be worth about $16.3 billion on the public market.

Notably, recent secondary marketplace trades on Hiive took place at an $8.37 billion valuation.