Chrysalis surges on Klarna IPO success and Starling sale prospects
Chrysalis (CHRY ) shares rallied over 8% today on significant updates from its two largest holdings, Swedish fintech giant Klarna and London-based digital bank Starling.
Together, the companies account for more than half (53%) of the trust’s portfolio.
Klarna IPO beats expectations
For Klarna, it was the announcement of its hotly anticipated initial public offering (IPO).
The ‘buy now, pay later’ giant floated on the New York Stock Exchange yesterday at $40 per share, above the $37–39 indicated range, valuing the business at $15.1bn. Shares will begin trading on Wednesday.
Reports suggest the IPO was more than 20 times oversubscribed, with selling shareholders representing about 10% of the total shares outstanding.
Klarna had previously attempted a listing in April, but the move was delayed due to President Trump’s newly imposed tariffs, upending global markets.
CHRY opted not to participate in a sell-down, signalling management’s confidence that the company remains a good value even at the current price.
The trust first invested in Klarna in 2019 at a valuation of $5.5bn and today holds 4.2m shares.
According to Panmure Liberum analyst Joachim Klement, ‘the reports read very positively for Chrysalis.’
‘We estimate CHRY is carrying Klarna at c.$45 per share and would expect Klarna shares to trade strongly later today,’ he said, adding ‘Klarna’s IPO means that the company will have c.30% of its NAV in gross cash and listed securities.
‘This makes the near 30% discount to our pro-forma NAV look incredibly attractive, implying a heavy discount on the rest of the portfolio. Given the positive news and operational performance of holdings like Starling (42% of NAV) and Smart (14% of NAV), we think the shares look incredibly attractive at these levels.’
In line with other major shareholders, CHRY’s shareholding in Klarna is subject to a customary lock-up period of six months from IPO.
Managers Nick Williamson and Richard Watts noted that since first investing, ‘Klarna has grown materially in size – [gross merchandise value] has risen from $35bn in 2019 to over $102bn in 2024 – and the company has moved from a significant loss-making position a few years ago into profitability.
‘It is clear that consumers are looking for more innovative credit solutions than those offered by incumbents, and we expect this market dynamic to drive significant future growth opportunities for the industry.
‘Combined with a number of significant relationship agreements that Klarna has signed with major players in the ecommerce and payments industries, we believe the outlook for sustained, robust top-line growth is significant.’
Starling secondary sale looms
Meanwhile, rumours have circulated that Starling Bank is preparing a secondary share sale that could value the lender between £3.5bn and £4bn, above CHRY’s current holding mark of £3.3bn as of the end of June.
Jefferies analyst Matthew Hose estimates such a transaction could result in a 6% to 21% uplift in the valuation of the holding, translating to a 2.5% to 9% net asset value (NAV) uplift for Chrysalis – given the bank accounted for 42% of NAV at the reporting date.
Additionally, Hose noted CHRY’s potential participation in the sale would allow it ‘to address the current high level of portfolio concentration and release liquidity for the next phase of the capital allocation policy.’
The trust has almost completed its £100m share buyback programme and from here plans to return 25% of net realised gains against cost.
‘With a £1bn cost basis in Starling, any partial sale at current valuations would crystallise significant gains and generate fresh capital for shareholder distributions,’ Hose said.
As of yesterday, CHRY trades at a 30.6% discount.
