Klarna delivered its earnings on August 18 and the market's verdict was brutal — a 23% single-day collapse that wiped out months of recovery and left the bulls who dominated options positioning going into the print badly offside.
The reversal from pre-earnings sentiment is stark. Two notes published before the results described an unusually call-skewed options market, with the put/call ratio hitting lows near 0.53 and conviction building for an upside surprise. That thesis did not survive contact with the numbers. The PCR has since whipped back to 0.66 — still below its 20-day mean of 0.62 on a raw basis, but the z-score of 1.13 now sits modestly above average, reflecting a rapid flip toward hedging demand. The options market went from pricing in a rally to absorbing the damage in roughly 48 hours.
Short positioning held remarkably steady through the chaos. At 8.5% of free float — approximately 32.2 million shares — the short interest figure barely budged on the day of the drop, rising just 0.5% and trimming less than 1% on the week. The month-on-month picture actually shows shorts up 12%, meaning the broader bear thesis was built well before the print confirmed their view. Borrow costs have drifted lower over the past month, now at 0.75% versus above 2% in early July, and availability has loosened to 78% — a materially easier borrow environment than the near-fully-lent conditions seen in mid-July. Shorts who held through the print are sitting on significant gains without facing meaningful short-squeeze pressure from the lending side.
The Street's response was immediate and unanimous in direction. Every analyst who reported today cut their price target. Morgan Stanley's James Faucette moved first, dropping his target from $21 to $17 while holding Equal-Weight. JPMorgan's Tien-Tsin Huang went further — a full downgrade from Overweight to Neutral with the target cut from $22 to $18, the most consequential move of the day given JPM had been among the more constructive voices as recently as early July when they raised to $22. Barclays, BMO, TD Cowen, and Wells Fargo all trimmed targets in parallel, with BMO now at $15 — essentially at the current price. The consensus sits at Hold with a mean target of $21.72, implying roughly 44% theoretical upside from Tuesday's close of $15.06, but that number should be treated with caution given targets were reset today and may continue moving. Goldman Sachs, which held a $25 Buy target as of early July, has not yet updated — that figure is likely to be revised. The factor scores reinforce the contradictory picture: EPS momentum over 30 and 90 days ranks in the 95th and 96th percentiles respectively, pointing to forward earnings expectations that remain strong, yet the EPS surprise score ranks in just the 9th percentile, suggesting the actual delivered numbers disappointed relative to forecasts.
The ownership structure complicates the read. Sequoia Capital is the largest external holder at nearly 16%, with SoftBank at 4% and Silver Lake at 3.8% — all long-term venture holders with no recent changes reported. Founder Sebastian Siemiatkowski holds 6.5%. BlackRock added roughly 2.7 million shares through July, and Pictet Asset Management built a new position of 3.5 million shares through June, both moves made before the crash. Marshall Wace added just over 1 million shares through June. The recent insider trade data shows only routine share awards at negligible values in April and May — nothing that changes the picture. With the cap table dominated by long-term holders and recent institutional buying now deeply underwater, the question of whether those incremental buyers add at current levels or trim to manage losses will shape near-term supply dynamics.
Peers held up considerably better on the week. AFRM fell 4% over the same period but has been far less volatile intraday. TOST and CHYM both finished Tuesday in positive territory. The divergence is sharp enough to suggest the Klarna selloff is name-specific rather than a sector read-across. The ORTEX short score of 75.3 — which has been elevated for weeks — now reflects a configuration where bears were right, shorts are profitable but not squeezed, and the next test is whether the $15 area holds or whether fresh selling from disappointed longs accelerates. The next scheduled earnings event is November 18, leaving a long window for the narrative to either stabilise around the bull case — merchant growth, US BNPL expansion, improving underwriting — or for the bear thesis around GMV-per-merchant compression and smaller-retailer mix to deepen.
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