Klarna Faces Securities Class Action Over IPO Risk Disclosures as Credit Losses Surge

New updates have been reported about Klarna.

Klarna Group plc is at the center of a growing securities class action alleging that its September 2025 IPO documents understated credit risk and loss reserve exposure, with investors facing a February 20, 2026 deadline to seek lead plaintiff status. The complaint claims Klarna’s registration statement and prospectus mischaracterized the robustness of its credit modeling and risk management, particularly in relation to lending to financially vulnerable and relatively unsophisticated consumers, including those borrowing at high effective interest rates for small-ticket items such as fast-food deliveries. Plaintiffs argue Klarna downplayed the likelihood of a sharp increase in provisions for credit losses, a risk that materialized soon after the IPO.

On November 18, 2025, Klarna reported Q3 2025 results showing a 102% year-over-year jump in its provision for credit losses and a substantial year-over-year rise in operating losses, developments that triggered a significant negative market reaction, with the stock trading nearly 22% below its IPO price. The litigation focuses on whether these heightened credit risks and potential reserve spikes were known or reasonably knowable at the time of the offering but omitted or minimized in the IPO documents, exposing Klarna to potential damages, legal costs, and heightened regulatory and investor scrutiny. While no liability has been established, the case raises questions about the sustainability and pricing of Klarna’s credit-centric business model and the transparency of its risk governance, with possible implications for future capital-raising, valuation, and strategic emphasis on higher-risk consumer segments. Executives and investors will be watching the progression of the lawsuit and any related investigations closely for signals on Klarna’s disclosure practices, risk appetite, and potential need to adjust underwriting standards or provisioning policies going forward.