Klarna clinches a $1.7 billion agreement to facilitate $40 billion in lending as its stock plummets 76% since its IPO.

      Six months after debuting on the New York Stock Exchange at $40 per share, Klarna's stock is now trading at about $12. This Swedish buy-now-pay-later firm, which once represented the entry of European fintech onto Wall Street, has seen its market value drop by over 75% since its launch in September. On Tuesday, the company announced a significant risk transfer transaction worth $1.7 billion, in partnership with a consortium led by Värde Partners. This marks its sixth such deal, aimed at freeing up capital and facilitating up to $40 billion in lending. This transaction represents Klarna's largest and most effective SRT to date, raising questions about whether financial engineering can support a growth path that public markets have notably reassessed.

      A significant risk transfer (SRT) allows a bank to shift the credit risk of a specified loan portfolio to external investors, often via synthetic securitization. Although the underlying loans remain on the bank's books, the risk of loss is transferred to third parties. When structured properly, this transaction grants the bank regulatory capital relief, reducing risk-weighted assets and freeing equity for new lending initiatives. For Klarna, which has a Swedish banking license and operates under regulation, the SRT framework enables it to extend its capital across a substantially larger loan portfolio than its balance sheet could otherwise accommodate.

      The agreement covers $1.7 billion of euro-denominated loans over a three-year period. Klarna's chief financial officer, Niclas Neglén, described the banking license as “one of our biggest competitive advantages,” with the SRT program serving to maximize every dollar of capital. This perspective may vary based on whether one views Klarna as a tech firm with a bank license or as a bank with effective software.

      This transaction follows a $2 billion facility announced by Klarna on March 23 with funds managed by Elliott Investment Management, known for its activist hedge fund strategies. This previous deal doubled an ongoing forward-flow and whole-loan sale agreement through which Klarna sells newly originated US financing receivables to funds managed by Elliott regularly. The three-year term of this facility aims to support up to $17 billion in US lending. Combined, both arrangements allow Klarna a capital structure that can sustain over $40 billion in total lending capacity, a figure significantly larger than the company's current balance sheet and reflective of its ambitious expansion, especially in the United States.

      The US market showcases Klarna's most robust growth, where its capital efforts are focused. In Q4 2025, US revenue grew by 58% year-on-year. The company has 29 million American consumers, representing approximately 11% of the adult population. Its total revenue for 2025 reached $3.5 billion, marking a 25% increase, with gross merchandise volume totaling $127.9 billion. Q4 alone brought Klarna's first billion-dollar revenue quarter, achieving $1.082 billion. Globally, the active consumer base totals 118 million, with over one million merchants on its platform. From the perspective of lending metrics, Klarna is rapidly expanding.

      However, the stock market seems to disagree, as Klarna’s shares have plummeted from a 52-week high of $47.48 to about $12. This decline reflects broader market skepticism regarding unprofitable or barely profitable fintech models and specific concerns about credit risk amid a macroeconomic environment where consumer delinquencies are rising. Klarna's IPO in September 2025 raised $1.37 billion, with shares priced at $40 and demand oversubscribed by roughly 25 times. That initial enthusiasm has since waned.

      In response, Klarna has opted to enhance capital efficiency rather than scale back. The SRT and Elliott frameworks are designed to increase lending without proportionately expanding the balance sheet, a strategy that hinges on sustainable credit performance and continued investor interest in the underlying risks. Värde Partners, which leads the SRT consortium, has supplied $13 billion through its asset-based finance strategy since 2008, demonstrating experience in the European risk transfer sector. Elliott’s involvement in the US initiative reflects the hedge fund’s confidence in the credit quality of Klarna’s short-term consumer receivables.

      The AI aspect also plays a role here. Klarna has proactively utilized artificial intelligence to downsize its workforce, reducing its employee count from about 7,400 to around 3,000 mainly through attrition and a hiring freeze, where departing personnel were replaced by AI systems rather than new hires. CEO Sebastian Siemiatkowski noted that an OpenAI-powered customer service assistant could perform the tasks of 700 agents, with the remaining staff receiving a 60% pay increase funded by those savings. However, the company has since started to rebuild segments of its customer service workforce, having recognized quality concerns with the fully automated model, transitioning to a hybrid approach that complicates the narrative of seamless efficiency.

      The broader context highlights a BNPL