Analysis of the Klarna IPO Using GPT 4.5 (F1 Filing)

This is a deep dive into both the prompt and the key output from my work with GPT 4.5 to tease out the insights from the Klarna F1 filing.

How to go about it:

Step 1: Download the F1 filing from the Edgar website

Step 2: Upload the F1 file to your favorite LLM (in this case, I used GPT 4.5)

Step 3: Take screenshots of the financial statements (P&L, Balance Sheet, Cash flow etc.)

Step 4: Use the prompt below to dig deep

Iterative Steps: Do not hesitate to dig deeper and ask questions if you think that the LLM is not being clear or is inaccurate. Please double check all financial calculations- LLMs are still not great at math!

F1 Filing analysis Master prompt

🔍 Step 1: Company Overview and Market Positioning

• Summarize Klarna’s business model and core product offerings.

• Identify Klarna’s primary revenue streams (with specific revenue numbers and percentages for 2024).

• Assess Klarna’s market positioning relative to key competitors, outlining competitive strengths and vulnerabilities.

💰 Step 2: Financial Performance Analysis

• Conduct a detailed horizontal analysis (YoY growth) of revenue, operating profit/loss, and net profit/loss from 2022 to 2024.

• Perform a vertical analysis (each cost/revenue component as a percentage of total revenue for 2024).

• Evaluate profitability metrics, including operating margin, transaction margin, net margin, and transaction margin growth (specify percentages for 2024).

💸 Step 3: Cost Structure Breakdown

• Provide an explicit breakdown of Klarna’s operating expenses for 2024 (processing & servicing, funding costs, consumer credit losses, technology & product development, marketing, administrative, depreciation/amortization).

• Calculate the percentage of each cost category relative to total expenses in 2024.

• Highlight notable trends or concerns in expense management.

📈 Step 4: Cash Flow and Liquidity Analysis

• Analyze operating, investing, and financing cash flows (provide explicit figures for each, for 2022 to 2024).

• Assess Klarna’s liquidity position, detailing risks or strengths related to cash management and runway, including end-of-year cash balances.

📊 Step 5: Balance Sheet and Solvency Analysis

• Analyze Klarna’s asset composition (cash, consumer receivables, total assets) and liabilities (consumer deposits, total liabilities) explicitly for 2024.

• Calculate leverage ratios (Debt-to-Equity, Debt-to-Assets) and liquidity ratios (Current Ratio, Quick Ratio).

• Highlight risks related to Klarna’s solvency and leverage position.

💡 Step 6: Customer and Monetization Metrics

• Evaluate customer growth (active consumers), average revenue per active customer (ARPAC), and year-over-year growth (2022–2024).

• Analyze Klarna’s monetization model explicitly for 2024, detailing transaction revenue, interest income, merchant revenue, advertising, and consumer fees (provide percentages and specific numbers).

🚨 Step 7: Risk Assessment

• Identify and analyze major risk factors disclosed in Klarna’s S-1 filing.

• Specifically address credit underwriting risks, consumer credit loss trends, funding risks, and regulatory compliance risks.

• Evaluate how these risks could impact Klarna’s future performance and financial stability.

🛡 Step 8: Governance and ESG Evaluation

• Analyze Klarna’s governance structure, focusing explicitly on dual-class share structure and its impact on corporate governance.

• Highlight potential conflicts of interest or governance risks due to founder or executive control.

• Evaluate Klarna’s disclosed or implied ESG positioning relative to industry standards, addressing investor ESG concerns.

📉 Step 9: Sensitivity and Scenario Analysis

• Conduct scenario analysis on Klarna’s key business assumptions (credit loss rates, merchant growth, interest rates, macroeconomic downturns).

• Evaluate potential financial impacts under adverse scenarios, clearly outlining assumptions and projected outcomes.

📌 Step 10: IPO-Specific and Valuation Analysis

• Analyze underwriting details (share pricing range, implied market capitalization, dilution from employee stock options, lock-up periods).

• Evaluate valuation metrics explicitly (Price-to-Earnings, EV/EBITDA, Price-to-Sales, Price-to-Book), comparing Klarna with fintech peers (Affirm, PayPal, Afterpay).

🧭 Step 11: Comprehensive Investment Recommendation

Based on your detailed analysis of each dimension above, clearly present:

• A concise summary of key strengths and investment highlights.

• Explicit identification of significant risks and concerns.

• Balanced synthesis leading to a clear, justified investment recommendation (Strong Buy, Moderate Buy, Neutral, Moderate Sell, Strong Sell).