"European Huabei" is sought after! Klarna (KLAR.US) IPO will be priced tonight, valued at only half of Affirm's.

"European Huabei", the Swedish buy now pay later giant Klarna (KLAR.US) will announce the pricing of its initial public offering (IPO) on Tuesday evening, with investors rushing to buy its shares. The company's appeal lies in the fact that its implied market valuation is currently about 50% lower than its competitor, "American Huabei" Affirm Holdings (AFRM.US). According to reports, the Swedish payment company will issue 34.3 million shares this time, with over 80% sold by early supporters and its stock receiving at least eight times oversubscription. In light of strong demand, Klarna's IPO pricing may be $37 per share, at the upper end of the $35 to $37 price range, or even higher. Boosted by expectations of interest rate cuts in the U.S. and a more friendly regulatory signal from Washington, Klarna's IPO comes at a time when fintech stocks are once again favored by the market. Despite the bullish market sentiment, Klarna's IPO market value is only around $14 billion under the terms of the agreement, far below Affirm's current market value of over $28 billion. Roth Capital Markets senior research analyst Rohit Kulkarni said, "I don't think Klarna should trade at the same valuation multiple as Affirm in the short term. But some may find the discount relative to Affirm attractive for IPO investors." It is worth noting that both companies had roughly the same revenue in the most recent quarter, but Affirm's stock price has risen more than 40% this year, with faster revenue growth and stronger profitability. In the three months ending June 30, Klarna's revenue increased by 21% year-on-year to $823 million, but this accounted for less than 3% of its total merchandise transaction value of $31.2 billion during the same period. Meanwhile, San Francisco-based Affirm's revenue grew 33% to $876 million in the same period, equivalent to 8% of its total merchandise transaction value of $10.4 billion. Differences in business models The two companies have different business models. Klarna only entered the U.S. market in 2019, with a business model focused more on small short-term loans, with the most common form being consumers paying within 30 days of purchase. Affirm's loans are typically tied to large purchases and offer long-term zero-interest loan options, without late fees. Klarna's average order value in the past year was $101, while Affirm's average order value in the most recent quarter was $276. Danske Bank senior fintech analyst Dan Dolev said, "Affirm's stock price is likely to maintain a higher premium level, not only compared to Klarna, but also compared to the entire industry." Klarna's management claimed in its IPO roadshow that its revenue model is more diversified and sustainable compared to competitors such as First Capital, Inc. (COF.US), Affirm, American Express Company (AXP.US), and PayPal (PYPL.US). The company also emphasized achieving a more balanced distribution in charging fees to consumers and merchants, and stated that its advertising revenue has been growing. Klarna has recently gained a leading advantage in the promotion of the buy now pay later (BNPL) business. This business aims to tap into a market of around $1 trillion as an alternative to credit cards issued by traditional banks. The 20-year-old company saw its monthly active users more than double in August compared to the same period last year, leading other BNPL companies, with user growth outpacing that of Affirm's 27%. Bloomberg Intelligence analyst Diksha Gera recently estimated that based on a P/E ratio of 11 to 14 and a forecasted growth of about 12% in 2025, Klarna's valuation is expected to be between $12 billion and $16 billion. Will the fintech IPO frenzy continue? Danske Bank's Dolev said that the Fed's interest rate cuts will lower financing costs, alleviate underwriting pressure for BNPL businesses, and also promote business volume growth. However, from a negative perspective, if the U.S. labor market continues to deteriorate, loan demand will decrease. Klarna's listing was initially postponed due to tariff turbulence. The company is now joining the fintech IPO frenzy and will be the largest deal since Chime Financial (CHYM.US) went public in June and raised $864 million. Chime's stock rose 37.4% at the opening, but early enthusiasm has gradually waned, leading to its current stock price below the IPO price. Bloomberg Intelligence's Gera said, "Klarna's IPO may leverage the momentum built up by new bank Chime and stablecoin issuer Circle (CRCL.US) and set a key benchmark, especially for European peers considering listing in the U.S., such as Revolut and Monzo. Its success will once again drive fintech fundraising activities and provide strong evidence for the growth prospects of the BNPL industry. Conversely, weak demand could further delay already cautious listing plans." Klarna is planning to list on the New York Stock Exchange with the ticker symbol "KLAR". The IPO is led by Goldman Sachs Group, Inc., JPMorgan, and Morgan Stanley.