The company has quickly built out a global payment network and shopping assistant. It launched in 2005 and has grown to support 150 million active customers and over 500,000 merchants across 45 countries. Its platform handles 2 million transactions per day. Klarna's strategy has drawn some of the biggest venture capital and financial firms to become early investors in its financial technology platform.
These factors have made Klarna a widely anticipated initial public offering (IPO). Here's a guide to everything you need to know about how to invest in Klarna ahead of its eventual initial public offering (IPO).
Is it publicly traded?
Is Klarna publicly traded?
Klarna wasn't a publicly traded company as of late 2023. The financial technology company is privately held and has the backing of some of the biggest names in venture capital and finance, including Sequoia, Silver Lake, and Visa (V 0.41%).
When it will IPO
When will Klarna IPO?
Klarna still didn't have an IPO on the calendar as of late 2023. There was a lot of speculation that the company would go public in 2023. The company had everything in place to complete its IPO but is currently waiting for market conditions to improve before moving forward with an IPO.
How to invest
How to buy Klarna stockBecause Klarna still hasn't completed an IPO, investors can't buy shares of the financial technology company in their brokerage account.
However, accredited investors (i.e., high-net-worth individuals or those with high incomes) can sometimes buy pre-IPO shares of companies like Klarna on secondary platforms such as Equity Bee or Forge Global. Accredited investors who really want to get in ahead of its IPO should check out those platforms to see if they have shares of Klarna available to buy.Non-accredited investors will need to continue waiting until the company launches its IPO. In the meantime, those interested in the financial technology trend could invest in one of Klarna's publicly traded competitors. Here are three options to consider:
1. Affirm Holdings
Affirm Holdings (AFRM 3.06%) is a buy now, pay later (BNPL) leader. The company sets itself apart from competitors like Klarna by not charging customers any fees, including late fees. It has two flexible repayment options: Pay in four (consumers make four interest-free payments every two weeks) and monthly payment plans (that do charge interest). Affirm had 16 million active customers in mid-2023 and processed more than $20 billion in gross merchandise volume on its platform over the past year.
Block (SQ 1.1%), formerly Square, is a global financial technology company. It offers businesses several building blocks to help them grow, including Square and Cash App. Block accelerated its BNPL business in 2022 when it acquired Afterpay for $29 billion, which it integrated into Square and Cash App.
3. PayPal Holdings
PayPal (PYPL 0.52%) is a leading digital payments company. It has a diversified portfolio of financial technology tools and brands, including Honey, Venmo, and its namesake platform. The company launched its BNPL service in 2020. It also offers a pay-in-four option and monthly installment plans, giving consumers purchase flexibility.People who want to buy one of these Klarna competitors can purchase shares in any brokerage account. Here's a step-by-step guide to investing in these financial technology stocks.
- Open a brokerage account. You'll have to open and fund a brokerage account before buying shares of any company. If you still need to open one, here are some of the best-rated brokers and trading platforms. Take your time to research the brokers to find the best one for you.
- Figure out your budget. Before making your first trade, you'll need to determine a budget for how much money you want to invest. You'll then want to decide how to allocate that money. The Motley Fool's investing philosophy recommends building a diversified portfolio of 25 or more stocks you plan to hold for at least five years. You don't have to get there on the first day. For example, if you have $1,000 available to start investing, you might want to begin by allocating that money equally across at least 10 stocks and then grow from there.
- Do your research. It's essential to thoroughly research a company before buying its shares. You should learn about how it makes money, its competitors, its balance sheet, and other factors to make sure you have a solid grasp on whether the company can grow value for its shareholders over the long term.
- Place an order. Once you've opened and funded a brokerage account, set your investing budget, and researched the stock, it's time to buy shares. The process is relatively straightforward. Go to your brokerage account's order page and fill out all the relevant information, including:
- The number of shares you want to buy or the amount you want to invest to purchase fractional shares.
- The stock ticker (AFRM for Affirm Holdings, SQ or Square, or PYPL for PayPal Holdings).
- Whether you want to place a limit order or a market order. The Motley Fool recommends using a market order since it guarantees you buy shares immediately at the market price.
Investors would follow a similar process to buy an IPO stock like Klarna when it goes public. Once shares become available, select Klarna's chosen stock ticker to buy shares through your brokerage account.
Is Klarna profitable?Even though Klarna is a private company, it publicly reports some of its financial results. The company gave investors a glimpse at its first-half results for 2023 in August. Klarna reported that its revenue increased by 17%. It also returned to profitability for one month during the second quarter, ahead of schedule.Klarna is on the road to sustainable profitability. After its six-month report, CEO Sebastian Siemiatkowski told Reuters, "We feel very confident that we'll be posting a profitable quarter very soon and then eventually also a full profitable year."Reaching sustained profitability will be important for Klarna. Companies that grow their earnings tend to create the most value for investors over the long term.
Should you invest?
Should I invest in Klarna?Klarna isn't public yet. However, it's gearing up for an IPO, which could happen in the coming year. That gives investors some time to research the company before buying shares.Research is an important step that investors won't want to skip. It could increase your conviction that the stock is worth buying. However, you also might uncover something in your research that changes your mind about buying the stock.With that in mind, here are some reasons why you might want to buy shares of Klarna when it goes public:
- You're a fan of the company and use its services.
- You think it can disrupt the credit card and financial services industries.
- You think Klarna can continue growing its revenue briskly and eventually start producing sustainable profits.
- You believe Klarna can keep its competitors at bay.
- You prefer to invest in founder-led companies.
- You're excited that Klarna is embracing artificial intelligence to enhance its products.
- You think the company trades at a much more enticing valuation following a big decline in its private market value between its last two funding rounds.
- You don't use BNPL products.
- You prefer one of Klarna's competitors.
- You're concerned about there being too much competition in the BNPL space.
- You're worried that a recession could significantly affect Klarna's growth and profitability.
- You're not sure Klarna can become consistently profitable.
ETFs with exposure to Klarna
- ARK Fintech Innovation ETF (ARKF 1.62%): This ETF is actively managed (by the well-known Cathie Wood) and focused on the financial technology innovation theme. It generally holds 35 to 55 companies. Block was one of its largest holdings in late 2023, at 7.1% of the fund's total. The fund had a 0.75% ETF expense ratio.
- GlobalX FinTech ETF (NYSEMKT:FINX): The passively managed fund focuses on companies in the emerging financial technology sector. The fund had 61 holdings as of late 2023, including PayPal at 5% of the fund's total assets. It had a total expense ratio of 0.68%.