Owe, owe, owe

At its peak as a private company Klarna was valued at $45.6bn.^{2Crunchbase NewsKlarna Shares Pop In Long-Awaited Public Market Entry10 Sept 2025} On 9 September 2025 it priced its shares at $40 and was worth about $15.1bn.^{4Press Association, via LBCKlarna fetches £11bn valuation after major New York IPO10 Sept 2025,5IPOScoopThe IPO Buzz: Klarna Prices IPO at $409 Sept 2025} That is roughly a third of the peak, which Klarna’s backers may call a triumph, and not without cause. The shares were priced above a $35-$37 range, and on 10 September they opened at $52.^{2Crunchbase NewsKlarna Shares Pop In Long-Awaited Public Market Entry10 Sept 2025,5IPOScoopThe IPO Buzz: Klarna Prices IPO at $409 Sept 2025}

Both numbers are correct, and the gap between them is the story. At the peak the market was paying for a growth platform that happened to lend money. At the IPO it is paying for a lender that happens to have a good app. We think the second description is the honest one. Buy-now-pay-later (BNPL) is consumer credit. Its customers, its investors and its regulators should say so, and act accordingly.

From deep red to nearly black. Klarna, net result, $m

	Net result
2022	-1035
2023	-244
2024	21
H1 2025	-152

Source: Klarna Group plc, Form 424B4 prospectus¹

The case for treating it as something new is not silly. Klarna’s loans are short. The prospectus puts the average at about 40 days: 38 for Pay Later and 180 for longer-term Fair Financing.^{1Klarna (SEC filing)Klarna Group plc, Form 424B4 prospectus10 Sept 2025} Losses are modest. Provisions for credit losses came to 0.52% of transaction volume in the 12 months to June 2025.^{1Klarna (SEC filing)Klarna Group plc, Form 424B4 prospectus10 Sept 2025} On volume of $105bn in 2024 the firm set aside $495m, which is under half of one per cent by our arithmetic.^{1Klarna (SEC filing)Klarna Group plc, Form 424B4 prospectus10 Sept 2025} A credit-card issuer would sign for those figures and ask no questions.

But a short loan is not a safe one; it is a loan that has to be made again. A customer who pays in 30 days and returns for another purchase next week is borrowing continuously. Low losses on each loan tell you about the underwriting of that loan, not about the household that holds 12 of them. Customers who miss a payment can face late fees and debt collection, as the Press Association notes in its description of the products.^{4Press Association, via LBCKlarna fetches £11bn valuation after major New York IPO10 Sept 2025} That is what credit looks like when it goes wrong.

Nor has the business yet earned the valuation of a platform. Klarna lost $1.04bn in 2022 and $244m in 2023, made $21m in 2024 and lost $152m in the first half of 2025.^{1Klarna (SEC filing)Klarna Group plc, Form 424B4 prospectus10 Sept 2025} Revenue was $2.8bn last year.^{1Klarna (SEC filing)Klarna Group plc, Form 424B4 prospectus10 Sept 2025} At the IPO price the firm is worth about 5.4 times that,^{1Klarna (SEC filing)Klarna Group plc, Form 424B4 prospectus10 Sept 2025,4Press Association, via LBCKlarna fetches £11bn valuation after major New York IPO10 Sept 2025} a multiple that suits a lender with a cheerful brand.

Which brings us to the round trip. The peak valuation was a bet that BNPL would behave like software: grow at no cost, lose nothing and answer to nobody. Cheap money made the bet easy to place. What survived the fall in rates is a firm that sells 5,000,000 of its own shares, and has raised about $200m for itself (5m shares at $40, by our arithmetic), while existing holders sell 29.3m more.^{1Klarna (SEC filing)Klarna Group plc, Form 424B4 prospectus10 Sept 2025} Most of the $1.37bn raised, in other words, goes to the sellers, not to the company.^{1Klarna (SEC filing)Klarna Group plc, Form 424B4 prospectus10 Sept 2025,3The PaypersKlarna raises USD 1.37 billion in US IPO10 Sept 2025} Early backers are taking an exit at a third of the peak valuation. Public investors are taking a lender’s yield on a fintech’s story.

None of this makes Klarna a poor business. Merchants want the checkout conversion, and shoppers like to spread a cost without a plastic card. Klarna’s founder, Sebastian Siemiatkowski, told staff that the listing was “not just a milestone; it’s a statement”.^{4Press Association, via LBCKlarna fetches £11bn valuation after major New York IPO10 Sept 2025} We would like to know what it states. If it states that BNPL has grown up, then it should accept the obligations of grown-up lending: affordability checks that look at a customer’s whole borrowing and not one basket, plain disclosure of fees and arrears, and the same supervision as other consumer lenders.

Regulators in America and Europe should not treat short, small loans as a lesser category than long, large ones. The sums are small, the borrowers are many, and the borrowing never quite stops. Klarna’s investors have, in their way, already done the reclassification. The price of the shares says “lender”. The rulebook should say so too.