Klarna Faces Securities Class Action Over Loss Reserves After Post-IPO Credit Provisions Spike

New updates have been reported about Klarna.

Klarna Group plc is the target of a federal securities class action alleging that the company and its executives misled investors about credit risk and future loss reserves around the time of its September 2025 IPO. The complaint, now under investigation by securities law firm Faruqi & Faruqi, contends that Klarna materially understated the likelihood that its loss provisions would rise sharply within months of listing, given the credit profile of borrowers using its buy now, pay later (BNPL) products. Plaintiffs argue that the registration statement and prospectus filed for the IPO contained false or misleading statements and omissions, leaving investors without a clear view of the company’s true credit risk exposure. The case centers on whether Klarna adequately disclosed the risk that longer-duration BNPL loans and borrower mix would drive a near-term increase in provisions for credit losses, with the alleged shortfall in disclosure framed as a violation of federal securities laws.

The lawsuit gained traction after Klarna’s first public earnings release, which triggered a sharp market reaction. On November 18, 2025, a Bloomberg report carried by Yahoo! Finance highlighted that Klarna’s third-quarter revenue had reached record levels and exceeded expectations, but also that the company substantially increased its provisions for credit losses. Klarna reported a net loss of $95 million for the quarter, with provisions for loan losses rising to $235 million, above analyst estimates of $215.8 million, and representing 0.72% of gross merchandise volume compared with 0.44% a year earlier. Following this disclosure, Klarna’s share price fell 9.3% on the day, which forms a key element of the claimed investor damages. The suit seeks to represent investors who purchased Klarna securities pursuant to or traceable to the IPO registration statement, with a February 20, 2026 deadline to move for appointment as lead plaintiff. For Klarna, the action underscores heightened legal, regulatory, and reputational risk around BNPL underwriting, disclosure practices, and the sustainability of its credit performance as a newly public company.