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Generally, there are two reasons why a company might make it public when market conditions are difficult. It really thinks there’s something decent that could make things even worse.
Klarna, a Swedish fintech group offering buy-now, is pushing for its first public offering in New York despite the tough market. The S&P 500 Index has dropped nearly 4% so far this year, but measures to combat volatility such as VIX are jumping. Technology and consumer stocks are two classic drivers in the IPO market – a huge hit. Klarna’s peers’ affirmation fell by more than 15% in 2025.
So why are you rushing now? Klarna clearly doesn’t need money – it has an investment grade credit rating and a banking license that can fund the majority of lending through cheap consumer deposits. Several other groups, such as Chime and Genesys, are reportedly waiting for a calm state.
Certainly, Klarna’s profitability looks like a safer bet than many new lists. Not all companies can even reflect on their transactions in these market conditions. However, by the time the broader stock markets stabilize, there is also the risk that the company’s own outlook will appear to be inept. Klarna’s focus on short-term interest-free loans means it is affected by dynamics that are different from most financial groups. For example, changes in interest rates have relatively little impact, according to the IPO’s prospectus.
Consumer spending is the biggest macroeconomic factor of Klarna’s fate. Its biggest revenue stream – almost 60% of total in 2024 – is the fee paid by the retailer on each sale you buy now, paying to later providers. The more people shop, the more money you make.
But at this point, consumer trust has fallen over some of the most important countries. Klarna is especially exposed to spending on discretionary items such as clothing. Stocks of large clients such as H&M, Inditex and Holding are under pressure. The UK economy unexpectedly shrank in the first month of the year, but in the US, the University of Michigan Consumer Sentiment Index is at its lowest level since November 2022.
Klarna’s worst-case scenario was a serious recession, jumping at not paying what customers owe. But even a more modest spending slower puts current growth at stake. This is a problem for businesses that want to be valued like a rapidly growing technology group.
When Klarna first took off in the UK, it promoted its offering with a series of videos and posters of satisfying “smooth” images, including pencils tucked into pencils. While customers may still appreciate Klarna’s smooth approach to payments, investors should not bank their lives as public companies as equally frictionless.
nicholas.megaw@ft.com
