Quick overview

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Investors are eagerly placing orders ahead of Klarna Group Plc’s highly anticipated pricing debut, set for late Tuesday.

One reason for this interest is that Klarna’s implied market valuation is currently about 50% lower than that of its competitor, Affirm Holdings

 

According to Bloomberg, the Swedish payment company has received at least eight times more orders than it has shares available from its offering of 34.3 million shares, with over 80% of those sold by early backers. Sources familiar with the offering have indicated that the banking syndicate advises investors that Klarna’s IPO will be priced at $37, the upper end of its marketing range, and possibly even higher due to strong demand.

 

This IPO arrives as fintech stocks are witnessing a resurgence in optimism, fueled by more accommodating regulatory signals from Washington and expectations of interest rate cuts in the U.S. Despite the excitement, this offering would value Klarna at approximately $14 billion, significantly less than Affirm’s market value, which exceeds $28 billion.

Investors looking for promising stocks may view price differences as opportunities.

Rohit Kulkarni, a senior research analyst at Roth Capital Markets, stated that he does not believe Klarna should be valued at the same multiple as Affirm. However, he recognized that Klarna’s proposed discount compared to Affirm could be attractive to IPO investors.

 

Interestingly, both companies reported similar earnings in the most recent quarter; however, Affirm has experienced a stock increase of over 40% this year, growing more quickly and making higher profits. Klarna, which entered the U.S. market in 2019, focuses on shorter-term, smaller loans, with the most common option requiring payment 30 days after the purchase.

In contrast, Affirm offers longer-term, zero-interest loans with no late fees, typically associated with larger purchases. In the latest quarter, Affirm’s average order value was $276, while Klarna’s average order value stood at $101 for the same period last year.