"Buy now, pay later" giant faces major test: 90% of shares welcome unlock. Klarna faces heavy selling pressure, with dark clouds looming.

On Monday, Klarna (KLAR.US) will see the unlocking of approximately 335 million shares, marking the end of the lock-up period for the company after its initial public offering (IPO). This adds new valuation pressure to the financial technology company, which is already under pressure due to its poor short-term profitability. Since Klarna completed a $1.58 billion IPO in September last year, about 90% of the company's shares have been in a lock-up period. Since going public, the company's stock price has fallen by about two-thirds, leading to a decrease in valuation to around $5 billion. As of March 7th, Klarna's stock price closed at $13.75, a 66% drop from the IPO price. Chuckie Reddy, growth investment director at early investor QED Investors, said, "Once growth slows down even slightly, the company's valuation could face a significant reassessment." To alleviate concerns about a possible sell-off after the unlock, Klarna stated in a release that major shareholders need to submit relevant documents to the U.S. Securities and Exchange Commission before selling shares. Klarna stated on March 7th, "As of the date of this announcement, no related party of the company has submitted such an application." Some analysts expect that there is still some selling pressure in the market surrounding issues like credit quality, regulatory environment, and profit margins. However, a report from Bank of America Corp suggests that after years of valuation adjustments, short-term holders have mostly exited. Long-term investors like Sequoia Capital, General Atlantic, DST, and Dragoneer focus more on long-term value creation rather than quick exits, so the likelihood of selling in the short term is low. Matt Harris, partner at Bain Capital Ventures, said, "These long-term investors have a whole new timeline perspective. No one has to sell immediately when the lock-up period is over after making an investment." He also added that large shareholders can continue to hold shares through other independent ownership platforms. Klarna has a multi-class share structure that allows core shareholders including CEO Sebastian Siemiatkowski to maintain significant control over the company. Meanwhile, sources revealed that Siemiatkowski will focus more on the U.S. market in the future. He attended a TMT conference hosted by Morgan Stanley in San Francisco last week, speaking on topics such as AI efficiency and the company's banking business strategy. From "buy now, pay later" to banking transformation Klarna is actively pushing the development of its long-term loan product, Fair Financing business. However, this transformation brings profit pressure as the company needs to make provisions for loan losses in advance, while interest income takes longer to materialize. This transformation is making Klarna's balance sheet more similar to traditional banks, moving away from its famous "buy now, pay later" model. Harris noted, "As the business transitions from short-term loans to long-term products, Klarna faces significant challenges in communication." He stated that while this strategy has value in direction, "there is no doubt that the company's profitability will be more difficult to demonstrate during this transformation." To better explain its strategy to the market, Klarna has released a video titled "Klarna mythbusters" on its investor relations page on the official website. As of the time of writing, Klarna has not responded to these issues.