Klarna’s $1.7B Deal to Support $40B Lending Amid 76% Stock Drop

Just six months after its celebrated debut on the New York Stock Exchange, Klarna’s valuation tells a starkly different story. The Swedish buy-now-pay-later pioneer, which went public at $40 per share, now trades near $12, erasing over three-quarters of its market value. In response, the company has unveiled a major financial maneuver: a $1.7 billion significant risk transfer (SRT) deal with a consortium led by Värde Partners. This transaction, the largest of its kind for Klarna, aims to unlock regulatory capital and support up to $40 billion in lending capacity. The move highlights a central tension for the firm, as sophisticated capital engineering collides with deep public market skepticism.

An SRT is a form of synthetic securitisation used by regulated banks. It allows an institution to transfer the credit risk of a loan portfolio to external investors while keeping the loans on its own balance sheet. When executed properly, the bank receives regulatory capital relief, lowering its risk-weighted assets and freeing equity to underwrite new loans. For Klarna, which operates under a Swedish banking license, this mechanism is crucial. It enables the company to support a lending book far larger than its core equity would traditionally allow. Chief Financial Officer Niclas Neglén calls the banking license a key competitive edge, with the SRT program being the tool to maximize each unit of capital. This framing underscores the ongoing identity question: is Klarna fundamentally a tech firm with a banking permit, or a bank powered by superior software?

This latest deal follows another significant capital arrangement announced in late March. Klarna expanded an existing agreement with funds managed by Elliott Investment Management, the activist hedge fund, into a $2 billion facility. That structure involves the ongoing sale of newly originated U. S. consumer receivables to Elliott’s funds. Over three years, it is designed to support roughly $17 billion in American lending. Combined, the Elliott facility and the new SRT create a capital architecture capable of facilitating over $40 billion in total lending, a figure that vastly exceeds Klarna’s current balance sheet and signals aggressive expansion plans, particularly in the United States.

The U. S. market is the clear priority for this capital. Klarna’s revenue there surged 58% year-over-year in the fourth quarter of 2025. The platform now serves 29 million American consumers, about 11% of the adult population. Globally, active consumers reached 118 million, supported by over one million merchants. For the full year 2025, revenue hit $3.5 billion, a 25% increase, driven by gross merchandise volume of $127.9 billion. The fourth quarter alone marked Klarna’s first billion-dollar revenue quarter. By the core metrics of a lending business, Klarna is demonstrating rapid growth.

Public market investors, however, remain unconvinced that growth alone justifies value. The stock’s plunge from a 52-week high of $47.48 to around $12 reflects a broader reevaluation of fintech business models that are not consistently profitable. Specific concerns about consumer credit risk have intensified as delinquency rates have crept upward in the current macroeconomic climate. The stark contrast is striking: Klarna’s IPO in September 2025 raised $1.37 billion with shares priced at $40 and was oversubscribed by about 25 times, but that initial enthusiasm has completely faded.

Rather than pull back, Klarna is leaning into capital efficiency. The SRT and Elliott structures are designed to grow the loan book without proportionally expanding the balance sheet. This strategy hinges on two factors: stable credit performance and sustained investor appetite for the underlying risk. The involvement of experienced institutions provides some validation. Värde Partners has deployed $13 billion in asset-based finance since 2008, while Elliott’s participation signals its conviction in the quality of Klarna’s short-duration consumer receivables.

Klarna’s operational strategy has also involved a notable push into artificial intelligence. The company aggressively reduced its workforce from approximately 7,400 to around 3,000 employees, largely through attrition and a hiring freeze where AI systems replaced departing staff. CEO Sebastian Siemiatkowski famously stated that an OpenAI-powered assistant was doing the work of 700 customer service agents, with related savings funding significant pay raises for remaining employees. However, the company later had to recalibrate, rebuilding some human service capacity after encountering quality issues with a fully automated system. This shift to a hybrid AI-human model complicates the simple narrative of frictionless efficiency.

The company operates within a BNPL sector that has matured past its initial hype. Regulations have tightened in key markets like the EU, the UK, and Australia. Industry-wide credit losses have normalized at levels above the unusually low pandemic-era rates, making prudent risk management essential. Klarna’s banking license, once viewed mainly as a moat for deposits and lending, now serves a dual purpose as the gateway to SRT capital relief, a tool more commonly associated with traditional European banks than tech disruptors.

Through its SRT program, Elliott facility, and banking infrastructure, Klarna is constructing a capital-light lending machine. The model aims to originate loans at scale while transferring the associated credit risk to institutional investors. If executed successfully, the company’s growth ceiling will be set not by its own equity but by the depth of third-party capital willing to assume that risk. This is a potent framework, but it is inherently fragile, relying on the continued confidence of partners like Värde and Elliott. That confidence could dissipate rapidly if Klarna’s credit performance weakens.

Operationally, the current numbers indicate the strategy is functioning. Revenue is climbing, the user base is broadening, and the capital framework is growing more advanced. Yet a 76% stock decline from the IPO price is more than a market correction; it is a pronounced verdict. The next twelve months will determine whether Klarna’s financial engineering proves that judgment premature or prescient. The key variables are the trajectory of consumer credit quality and whether $40 billion in lending capacity ultimately acts as an engine for durable growth or becomes a stark measure of financial exposure.