Klarna Shares Face Volatility as Credit Losses Alarm Investors
STOCKHOLM – Klarna’s stock is under pressure following concerns raised about the company’s credit losses and profitability, with analysts warning of a potentially volatile six months for shareholders. The Swedish “buy now, pay later” giant has not reported a profit as 2019, fueling skepticism about its business model despite potential for future growth.
The core issue, according to financial experts, is Klarna’s ability to accurately assess and price risk. “The most crucial competence for credit companies is to price risk right. It is not clear well, they have not made money since 2019,” stated Rodney Alfvén, senior advisor, during a recent appearance on the EFN program Börslunch. This concern stems from a notable increase in credit losses between 2019-2022, which corresponded to 9.1 percent of the increased lending.
Compared to four listed Swedish niche banks – Resource, norion, TF Bank, and Qliro – Klarna’s credit losses are substantially higher. These banks averaged 3.1 percent of lending in credit losses over the past five years.Alfvén highlighted that Klarna’s credit losses in the first half of the year were 2.5 times larger than the entire swedish banking system, attributing the losses to borrowers failing to repay debts.
niklas Kammer echoes these concerns, noting that while Klarna possesses potential for strong underlying growth, notably in longer-maturity loans, near-term financial results will likely remain “weak.” He anticipates at least two quarters of disappointing reported figures despite positive underlying advancement.
Adding to the potential instability, only approximately 10 percent of Klarna’s shares were available on the market following its listing. This limited float means that even relatively small trading volumes can considerably impact the share price. Furthermore, shareholders from before the IPO are subject to a 180-day lock-up period after the listing, potentially exacerbating volatility in the first half of the year.
Klarna’s business model centers on absorbing management and credit risk at the customer level on behalf of traders. The recent surge in credit losses raises questions about the sustainability of this approach and the company’s ability to navigate a potentially challenging economic climate.
