Klarna Faces IPO-Era Securities Class Action Over Rising Loan-Loss Provisions

New updates have been reported about Klarna.

Klarna Group plc is facing a securities class action lawsuit alleging that its September 10, 2025 IPO documents understated the risk of sharply higher credit losses tied to its buy now, pay later portfolio. The suit, brought on behalf of investors who purchased Klarna shares in or traceable to the IPO at $40 per share, claims the company and its executives either knew or should have known that loss reserves were likely to rise materially within months, given the risk profile of many borrowers using Klarna’s installment products. Plaintiffs argue that these risks were not adequately disclosed, exposing investors to greater downside than indicated in the offering materials and setting the stage for subsequent stock price declines.

The complaint points to a November 18, 2025 Bloomberg report noting that Klarna posted a net loss of $95 million after significantly increasing provisions for potentially deteriorating loans, with those provisions rising to 0.72% of gross merchandise volume from 0.44% a year earlier and reaching $235 million, above analyst expectations of $215.8 million. Following these developments, Klarna’s share price fell to as low as $31.31, materially below the IPO price, which the lawsuit asserts reflects the market’s reaction to information that should have been more fully disclosed at the time of listing. Investors have until February 20, 2026 to seek appointment as lead plaintiff, and the case underscores heightened legal and regulatory scrutiny of credit risk and transparency in the buy now, pay later sector, with potential implications for Klarna’s litigation exposure, disclosure practices, and cost of capital going forward.