MW Klarna IPO emerges as fintechs gain traction and bankers signal more interest in stock debuts
By Steve Gelsi
Buy-now-pay-later company aims to tap into revival of interest in stocks like Affirm and SoFi
Plans by buy-now-play later company Klarna Inc. to file an initial public offering in the U.S. have come as stocks in other financial-technology companies have been roaring back, and as bankers have stepped up their bullish talk around a revival in IPOs.
Klarna has been often mooted for a potential IPO, but the Swedish company had been officially mum about it until Wednesday, when it reported filing a draft registration statement, or Form F-1, with the Securities and Exchange Commission to offer its ordinary shares in the U.S.
Overall, Klarna is no newcomer to the business world as a large, private company founded in 2005 with lots of backing from institutional investors.
At last check, Klarna's private-market valuation was about $15 billion, as based on a transaction by Chrysalis Investment to boost its stake in the company by about $156 million in October, according to private-market platform Forge Global.
With shares of other financial-technology, or fintech, companies such as Sofi Technologies Inc. $(SOFI)$ and Affirm Holdings Inc. $(AFRM)$ on fire in recent weeks and investors in a bullish mood following the presidential election, public-market valuations in the sector are actually outpacing those in the private market, said Jay Ritter, a finance professor at University of Florida who tracks the IPO market.
Read: SoFi's stock climbs above $14 as it logs best five-day run in over a year
"Private markets are no longer willing to pay the sky-high valuations that they did in 2021," Ritter told MarketWatch. "Public markets have become more attractive as a result."
As Wall Street bids up the Nasdaq Composite COMP and S&P 500 SPX indexes to record highs, more companies will go public, Ritter said.
Adding to the IPO momentum, $Citigroup Inc(C-N)$. (C) Chief Executive Jane Fraser said this week that she's seeing much more talk from companies around capital-raising, mergers and initial public offerings, in what she described as "the big unlock" from a lack of activity in the past two or three years.
Also read: Merger activity is down 40% from its peak. Citigroup CEO Jane Fraser sees a 'big unlock' ahead.
After the collapse of formerly powerful fintechs such as FTX and Wirecard, investors have been ramping up their due diligence investigations, Ritter said.
"Those that pass these tests are benefiting from a greater assurance that the company has a successful business model," he noted.
While many fintech companies failed in the tougher market conditions following 2021, "Klarna looks like it will be one of the successful survivors," Ritter added.
-Steve Gelsi
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(END) Dow Jones Newswires
November 13, 2024 16:20 ET (21:20 GMT)
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