Klarna Shares Fall 65 Percent Seven Months After IPO

Swedish fintech company Klarna has recorded a significant drop in its stock price seven months after its debut on the New York Stock Exchange. After an initial price of $40 in September last year, the stock was valued at $14.26 at the time of writing this article, representing a decline of approximately 65 percent.

Alongside market turbulence, several key management members have left the company since the beginning of the year. Among them are Andrea Ferraz Estrada, who was responsible for investor relations and M&A, Andrew Pietro, in charge of legal affairs, chief engineer Yuri Gusev, and Joao Tonon, who led the artificial intelligence department. The management characterized these departures as normal employee turnover.

Whether it is normal turnover or not, it is evident that financial challenges exist within the company, as confirmed by the fact that just two weeks ago, Klarna announced a risk transfer of $1.7 billion to a consortium led by investment firm Värde Partners.

This is their sixth such transaction, designed to free up capital and enable them to lend $40 billion. The risk transfer is a specific mechanism by which a bank transfers the credit risk of a defined portfolio of loans to external investors. The underlying loans remain on the bank’s books, but the risk of loss is shifted to third parties.

When properly structured, such a transaction qualifies the bank for the release of regulatory capital, thereby reducing risk-weighted assets and freeing up equity that can be used for new lending. For Klarna, which holds a Swedish banking license and operates as a regulated bank, the risk transfer allows for the expansion of capital to a much larger loan portfolio than its balance sheet could otherwise support.

Klarna’s Chief Financial Officer Niclas Neglén described the banking license as one of the company’s greatest competitive advantages, and the risk transfer as a means by which the company maximizes every unit of capital. Additionally, Klarna announced at the end of March a capital withdrawal from hedge fund Elliot Investment Management, which will enable further expansion, particularly in the U.S., where it has been directing the largest capital in recent months.

Growth in Revenue and Users

In the fourth quarter of 2025, revenue in the U.S. increased by 58 percent compared to the previous year. The company now has 29 million American users and generated a total of $3.5 billion in 2025, representing a 25 percent increase. The implementation of artificial intelligence was key to this growth.

Due to AI, Klarna decided to freeze hiring and begin layoffs, reducing the company from approximately 7,400 employees to around three thousand. This reduction was achieved mainly through natural attrition and a hiring freeze, with departing employees being replaced by AI systems.

CEO Sebastian Siemiatkowski publicly stated that the OpenAI-based customer assistant performed the work of 700 agents, and the remaining employees received a 60 percent raise funded by those savings. However, the company has since begun to restore parts of its human customer service.

Overall, Klarna is now operating under more realistic numbers after the hype around the BNPL segment (English buy now pay later) in which it dominates has subsided. Although revenues have stabilized after the inflated IPO and the user base continues to grow, the 65 percent drop from the peak is not a typical market correction but rather a market verdict.

However, it seems that a similar fate is shared by the stocks of other players in the BNPL market. Klarna’s largest competitor, Affirm Holdings, saw its stock price drop from $92 in September to $58 at the time of writing this article, representing a decline of about 37 percent.

In contrast, the second-largest competitor Afterpay, which was acquired by Square Inc (now Block Inc) in the summer of 2021, is experiencing growth. According to business results, Block grew by as much as 69 percent year-over-year in the consumer lending segment, where Afterpay plays a key role, in the fourth quarter of 2025.