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 misrepresented the company’s credit risk profile and loss reserve outlook, after a sharp post-IPO deterioration in credit performance. The lawsuit, brought on behalf of investors who bought shares in the IPO, claims Klarna’s registration statement and prospectus understated the risks of lending to financially vulnerable and unsophisticated customers, including borrowers taking on high-interest obligations for small-ticket items such as food deliveries, and thereby downplayed the likelihood of a significant spike in credit loss provisions. These alleged omissions came into focus on November 18, 2025, when Klarna reported Q3 2025 results showing a 102% year-over-year increase in its provision for credit losses and a marked rise in operating losses, triggering a stock sell-off that pushed the share price to roughly 22% below the IPO level.

The litigation poses both financial and strategic risks for Klarna, as the case challenges the adequacy of its credit modeling, risk management disclosures, and governance around public-market communication. Plaintiffs aim to show that the surge in loss provisions shortly after listing reflects risks that should have been highlighted to new investors, potentially exposing Klarna to damages, higher legal and compliance costs, and increased scrutiny from regulators and capital markets. The lead plaintiff motion deadline is February 20, 2026, a key milestone that will determine who directs the case on behalf of the class and may influence settlement dynamics and litigation strategy. Executives, investors, and counterparties will be watching for any further disclosures regarding Klarna’s underwriting standards, portfolio quality, and risk-control frameworks, as the company balances reputational impact with the need to maintain funding access and support its growth agenda in consumer credit and buy-now-pay-later services.