Klarna shares fall below IPO price a week after listing. What worries the market?

The value of shares of fintech Klarna Group has fallen below the IPO price just a week after a large placement. The quotes are under pressure from increasing competition from other fintech startups and uncertainty around the future trajectory of interest rates, Bloomberg writes.

On Friday, securities of Swedish digital payment service Klarna, which operates on the "buy now, pay later" model, were down 7.7% to $38.31 in New York trading. That's below the price of the stock's initial public offering on Sept. 10. The company then placed securities at $40 each. Moreover, the offering turned out to be significantly oversubscribed and was priced above the upper boundary of the initially announced price range. As a result, Klarna raised about $1.58 bln.

Relative to the closing level of the first day of trading, Klarna shares have already lost about 15%, while the S&P 500 index has added more than 1% over the same period.

In parallel with Klarna, securities of a number of its competitors also fell in price. Thus, on Friday the price of Affirm Holdings and Block shares decreased by 3.6% and 3.1%, respectively. As in the case with Klarna, the decline continues for the fourth session in a row.

The fall in stocks came amid a pause in the rally of technology securities in the U.S.: a series of strong macroeconomic reports cast doubt on the prospect of further rate cuts by the Fed, Bloomberg writes.

"Fintech stocks, including Klarna, are sensitive to macroeconomic factors such as interest rates and regulatory changes," explained Bloomberg Intelligence analyst Diksha Gera. - Although the Fed has started its rate-cutting cycle in 2025, any hints of a slower pace of easing or rising yields could put pressure on company valuations and market sentiment as rising yields increase borrowing costs."

In addition, investors may be reacting to signals that Klarna CEO Sebastian Siemiatkowski was under pressure, according to Bloomberg. The agency drew this conclusion from the record of the head of Klarna in the social network X. He wrote on September 24 that on the day of the IPO Klarna Chairman Michael Moritz sent him a message with the words: "Your company is 10 years behind Revolut". Semiatkowski himself, however, says he only laughed in response and that he and Moritz are very similar in that sense: "Complacency and a loss of sense of urgency is what's really dangerous," the Klarna CEO said.

Klarna continues to expand its line of products that allow users to pay for large purchases in long-term installments. This strategy has had a positive impact on net interest income, but has also worsened financial results: Klarna has to make larger provisions for potential losses on long-term installment loans, Bloomberg notes.

This article was AI-translated and verified by a human editor