(Bloomberg) — At times, the boardroom drama inside Klarna Group Plc this year felt like a soap opera.
It turns out, it could be one: a production company in Sweden that has made features for Netflix Inc. bought the rights to bring the company’s wild rise from a plucky provider of online payments to one of the year’s most highly-anticipated IPO darlings onto the big screen.
The producers won’t be short of material. The journey to this week’s announcement that Klarna had finally filed for an initial public offering in the US was marked by a clash of the firm’s co-founders, boardroom mudslinging involving the fintech’s most hallowed investor, a plunge into AI that allowed the company to shed hundreds of jobs and a series of arcane deals designed to bolster capital and get the company IPO ready.
When Klarna makes its public debut — which is expected to take place sometime in 2025 — it will likely be one of the year’s biggest offerings and some investors expect it to value the company at as much as $20 billion. While that would mark an improvement from the price tag it garnered in its last fundraising just two years ago, it’s still far from the $45.6 billion valuation Klarna got in a 2021 funding round.
“Klarna is going to be, obviously, a super large listing,” said Brad Isaac, a corporate partner at Fieldfisher who leads the law firm’s equity capital markets practice. “It’s certainly a positive development because I think what it indicates is that there is a lot more confidence” in the IPO pipeline, he said.
Klarna Chief Executive Officer Sebastian Siemiatkowski — who owns about 8% of the company — will soon hit the road along with bankers at Goldman Sachs Group Inc., JPMorgan Chase & Co. and Morgan Stanley to try to convince a whole new cadre of investors to back the firm he started nearly two decades ago.
Siemiatkowski has spent years laying the groundwork for those conversations. When Klarna first made its way to the US, the company was looking to challenge credit-card giants like JPMorgan Chase & Co. or Citigroup Inc.
Now, the 43 year-old founder has changed his tune. Rather than taking on the titans of card lending, he wants to challenge the likes of Visa Inc. and Mastercard Inc. in payments and become the next American Express Co., which operates as both the lender and the network on its cards.
That work has taken on new importance as the company has readied itself for its public debut. Amex, for instance, commands a price-to-book ratio of 6.8, more than three times higher than what JPMorgan is trading at.
Klarna has spent much of the last decade grappling with what role it wants to take in the payments industry. For years, the company offered merchants two ways of making its payment options available to their customers. With Checkout, a retailer could work directly with Klarna to make the company’s offerings available on their site. But merchants could also work with payment service providers, like Stripe or Adyen, to make Klarna’s offerings available.
That’s meant that those players have been both friend and foe to Klarna. On the one hand, the company wants to work with them to ensure its offerings get prime placement within their ecosystems alongside rivals like Affirm Holdings Inc. On the other hand, Klarna was competing with them directly to offer the Checkout solution to merchants.
Earlier this year, Siemiatkowski made the call: Klarna would sell the Checkout business in a deal that valued the unit at $520 million.
“Klarna Checkout is very dear to me,” Siemiatkowski said at the time. “The impact it’s had on Klarna’s journey is immense.”
Almost immediately, though, the move paid dividends: Within months, Adyen announced it would make Klarna available to consumers checking out at hundreds of thousands of the firm’s payment terminals. Weeks later, Worldpay — which processes $2.3 trillion in payments a year — also said it would make Klarna a default payment method to its merchants.
Those agreements are expected to help boost Klarna’s revenue, which already soared 27% in the first half of this year compared to the same period a year earlier. It’s now available at the checkouts of more than 600,000 merchants around the world and it’s charting a path toward more geographic expansion after snapping up Laybuy, a provider of buy-now, pay-later services in New Zealand.
“We want Klarna at every checkout, available everywhere, for everything, all the time,” David Sykes, Klarna’s chief commercial officer said earlier this year.
Siemiatkowski has also embraced artificial intelligence, allowing thousands of its employees to use ChatGPT in order to become more productive. The company has said the technology can already do the job of 700 workers and it’s shed nearly 25% of its workforce over the course of this year, ending August with about 3,800 staffers.
That’s helped Klarna whittle down costs and swing to an adjusted profit.
Last month, the firm struck a deal to offload £30 billion of its buy-now, pay-later loans that it originates in the UK to a subsidiary of the hedge fund Elliott Investment Management in the coming years. It was part of a longtime push to free up capital so it can more easily make new loans to customers.
“Despite Klarna’s impressive 20 years and global footprint, this is just the beginning,” said Andrew Reed, a member of the company’s board and a partner at Sequoia Capital, which is Klarna’s largest institutional shareholder.
Governance Challenges
While its financials were improving, Klarna was struggling to contain simmering tension inside its boardroom.
Just three weeks before Klarna filed to go public, the firm’s shareholders voted to oust one of the company’s board members, Mikael Walther, after he challenged governance decisions including a bonus plan that he claimed could give Siemiatkowski as much as $35 billion in the coming years.
The vote came as Klarna Chairman Mike Moritz said the board had lost confidence in Walther after he threatened to veto certain items or stall important decisions, including one to set up a new UK-based holding company. The new holding company was seen as crucial to Klarna’s IPO plans.
The company had already rejiggered its board earlier this year, replacing Sequoia Capital’s Matthew Miller after he unsuccessfully called for the removal of Moritz, who previously led the storied venture capital firm. Reed ultimately replaced Miller on the board.
Behind the scenes of that switch were Siemiatkowski and his estranged co-founder Victor Jacobsson. Throughout this year, the two have continued to clash on governance decisions, including how the company will go public and how much control its CEO will ultimately have. Walther has long represented the interests of Jacobsson on the board.
“Klarna has had a wild year,” said Jonas Malmborg, who authored a book on the history of the company that was published in January. He said he sold the film rights to that book to the Scandinavian company FLX earlier this year.
Inside Klarna’s offices around the world this week, though, there was little sign of the wild year that was. Instead, it was business as usual: Siemiatkowski was taking meetings from Stockholm and the company inked a new deal with the office supply store Staples.
For now, Klarna is looking to list sometime in the first half of 2025, Bloomberg reported on Friday. And it’s already asking banks to submit pitches in the coming days for junior roles on the offering.
“There’s one thing of a company filing for listing, or intending to list, then actually pulling the trigger,” Navina Rajan, a senior analyst for PitchBook. “So I would still caveat it’s good news, but there’s a long way to go.”
–With assistance from Pablo Mayo Cerqueiro and Mark Bergen.
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