Klarna, once Europe’s most valuable private tech company, has had its price tag slashed from $46 billion (€45 billion) to $6.7 billion in a difficult fundraising that highlights the crash in many tech valuations.
Michael Moritz, chairman of Klarna and a partner at investor Sequoia, blamed “investors suddenly voting in the opposite manner to the way they voted for the past few years”. He predicted that “after investors emerge from their bunkers, the stocks of Klarna and other first-rate companies will receive the attention they deserve”.
The $800 million fundraising round, announced on Monday, featured new investors including Mubadala, the sovereign wealth fund of the United Arab Emirates, and the Canada Pension Plan Investment Board in addition to existing investors such as Sequoia and Commonwealth Bank of Australia.
Just over a year ago, Klarna was valued at $46 billion after a $639 million funding round led by Japan’s SoftBank, the investment group behind a disastrous bet in office-sharing group WeWork. The new “pre-money” valuation, excluding the new cash, is only $5.9 billion.
Founded in 2005, the Swedish company pioneered “buy now, pay later”, which allows customers to delay payments or divide them into instalments. The popular form of credit was boosted by the ecommerce boom during the pandemic.
But with inflationary pressures increasing, investors have soured on growth-chasing fintechs, which have suffered an even steeper decline than any other technology sector.
Sebastian Siemiatkowski, Klarna’s chief executive, said the latest fundraise was “a testament to the strength of Klarna’s business” in the face of steep falls in global stock markets. Buy now, pay later providers have been particularly badly hit, as discretionary spending falls, defaults are expected to rise and higher interest rates further weigh on margins.
They are also facing growing competition from mainstream lenders and big tech players such as Apple, which is launching its own Apple Pay Later product in the US.
There is increasing regulatory scrutiny of the sector, too. In June the UK government outlined its plans to strengthen rules, including requiring lenders to carry out affordability checks and allowing consumers to take complaints to the financial ombudsman service. — Copyright The Financial Times Limited 2022
