Klarna Removes Investor Veto on Share Trades Ahead of $20bn IPO

Klarna, the leading buy now pay later (BNPL) finance company, has made a significant change to its shareholder structure ahead of a potential $20 billion US float.

The Stockholm-based company, which boasts approximately 150 million customers, recently informed its investors that it has taken control of stock transaction approvals and removed special rights held by a small number of its principal shareholders. This move effectively eliminates the ability of large shareholders to block trades by smaller investors.

According to an investor memo, Klarna made this decision after listening to feedback from shareholders. The memo stated, “A lot of you have raised concerns about the slow process of approving secondary transfers, and even more so about the uncertainty of whether the buyer would be able to complete the transaction.” It went on to say that “large shareholders” no longer have the right to interfere in the process.

This development comes amid escalating tension surrounding Klarna’s potential blockbuster flotation in New York, which sources say is likely to take place in the first quarter of 2025. The company has recently established a new UK-registered holding company as part of its journey towards a public listing, with the elimination of the shareholder veto occurring simultaneously.

At this time, investment banks have yet to be appointed for the float, but sources close to the company expect this to happen within the next three months. Speculation about a potential IPO has been circulating for months, with Klarna’s founder and CEO, Sebastian Siemiatkowski, announcing in January that it was expected to take place “quite soon.”

The decision to establish a holding company in the UK reflects the country’s strong legal, regulatory, and capital markets environment, according to sources. However, this news will likely disappoint the London Stock Exchange, which had been pushing for Klarna to float on the UK market.

Klarna’s valuation has seen some fluctuations in recent years, with the company being forced to slash its value to $6.7 billion (£5.3 billion) in a 2022 funding round. This is a significant decrease from its previous valuation of $46 billion (£36.6 billion) and has drawn backing from investors such as SoftBank’s Vision Fund, Sequoia Capital, and Mubadala, the Abu Dhabi sovereign wealth fund.

Bankers believe that, based on a comparison with New York-listed peer Affirm Holdings, Klarna should garner an IPO valuation of between $15 billion and $20 billion.

This corporate reorganization coincides with the UK government’s recent decision to veer away from a potential crackdown on the BNPL sector. Last July, Sky News reported that ministers were planning to scrap new legislation aimed at regulating providers like Klarna, with future rules potentially being incorporated into a reformed Consumer Credit Act. This decision has yet to be officially announced by the government and has been met with criticism from consumer campaign groups.

In the meantime, the Financial Conduct Authority has secured contract changes for BNPL customers, following a surge in the use of these services. According to research published by the City watchdog, approximately 27% of adults, or roughly 14 million people, have used BNPL at least once in the second half of 2023.

Klarna has previously expressed its support for “proportionate” regulation of the sector. The company is expected to release quarterly results on Thursday, showcasing its continued progress towards sustained profitability.

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