Klarna, Sweden's buy-now-pay-later giant often dubbed the "European Affirm," will complete its IPO pricing tonight with a $14 billion valuation that represents only half of its US competitor Affirm Holdings' market cap, creating a significant discount that is attracting substantial investor interest.
On September 8, Klarna's offering of 34.3 million shares received at least 8x oversubscription, with over 80% of shares being sold by early investors. Strong demand has pushed underwriters to set the IPO pricing guidance at $37 per share, reaching the top of the range and potentially higher.
Despite robust demand, Klarna's $14 billion valuation remains well below Affirm's current market capitalization of over $28 billion. While both companies reported similar quarterly revenues, Affirm demonstrates faster growth and stronger profitability, with shares up more than 40% this year.
The IPO comes as fintech stocks regain favor, with expectations of US interest rate cuts and a more favorable regulatory environment injecting renewed optimism into the sector.
**Business Model Differences Drive Valuation Gap**
Although both Klarna and Affirm focus on buy-now-pay-later services, their business models differ substantially.
Klarna primarily offers small, short-term loans, most commonly allowing consumers to pay 30 days after purchase, with an average order value of $101. In contrast, Affirm targets larger purchases, offering long-term zero-interest options without late fees, achieving an average order value of $276 in its latest quarter.
For the three months ended June 30, 2025, Klarna's revenue grew 21% year-over-year to $823 million, representing less than 3% of the $31.2 billion in gross merchandise volume on its platform. Affirm's revenue increased 33% to $876 million over the same period, capturing approximately 8% of the $10.4 billion in goods sold through its lending products.
Roth Capital Markets senior research analyst Rohit Kulkarni stated: "I don't think Klarna should trade at the same valuation multiple as Affirm at any point in the near term, but arguably, the discount relative to Affirm makes Klarna attractive for IPO investors."
Bloomberg Intelligence analyst Diksha Gera estimates Klarna's value between $12-16 billion based on 11-14x forward gross profit multiples and approximately 12% growth expectations for 2025.
Notably, Klarna has recently outpaced competitors in buy-now-pay-later market adoption. The 20-year-old company saw monthly active users more than double year-over-year in August, leading buy-now-pay-later firms and significantly outperforming Affirm's 27% growth.
Buy-now-pay-later services target a market exceeding $1 trillion as an alternative to traditional bank credit cards. During IPO roadshows, Klarna management emphasized having a more diversified and sustainable revenue model compared to competitors like Capital One Financial, Affirm, American Express, and PayPal, maintaining a more balanced ratio between consumer and merchant fees while growing advertising revenue.
**Interest Rate Cut Expectations Boost Sector Outlook**
Mizuho Securities senior fintech analyst Dan Dolev noted that rate cuts will reduce funding costs, easing underwriting pressure for buy-now-pay-later companies and supporting transaction volume growth. However, he warned that continued labor market deterioration would reduce loan demand.
Klarna's IPO, initially delayed due to tariff-driven volatility, represents the latest addition to a busy fintech listing season, marking the sector's largest IPO since Chime Financial raised $864 million in June. Chime shares surged 37.4% on debut but have since retreated below the offering price as initial enthusiasm waned.
Bloomberg Intelligence analyst Gera observed: "Klarna's IPO could continue the momentum from neobank Chime and stablecoin issuer Circle, establishing key benchmarks particularly for European peers like Revolut and Monzo considering US listings. Its success would re-accelerate fintech issuance and validate buy-now-pay-later industry prospects."